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hi, sir
net profit was caculate as being $10200. it was later discovered that capital expenditure of $3000 had been treated as revenue expenditure,and revenue receipts of $1400 had been treated as capital receipts.
My caculation is : 10200+3000-1400
but the answer is 10200+3000+1400, i dont understand why 1400 should be added?
will u please explain this for me ?Revenue receipts are receipts that should appear in the Statement of profit or loss (sales is a revenue receipt).
Capital receipts are receipts from things like the sale of non-current assets. They should not appear in the Statement of profit or loss.
So here, they have 1400 which should have appeared as revenue, but has not appeared.
When we correct it, extra revenue means we will have extra profit.
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