Correction of errors — OpenTuition Forums

HHoa10y ago

Dear sir, Inventory of stationery at the end of the period of $240 had been ignored Requirement : correct the error In textbook, we have answer as following : Dr Inventory of stationery 240 Cr Stationery expense 240 I don't understand the credit entry why we Credit to stationery expense but not sth else Please explain for me. Thanks in advance.

John MoffatTutor10y ago#1

When you buy the stationery you debit stationery expense and credit cash. However in the Statement of profit or loss we only want to show the cost of the stationery actually used. So if there is inventory at the end, then credit stationery expense (which reduces this years expense) and debit inventory (so we have the asset for the Statement of financial position).

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