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Errors

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Errors

  • This topic has 11 replies, 3 voices, and was last updated 11 years ago by John Moffat.
Viewing 12 posts - 1 through 12 (of 12 total)
  • Author
    Posts
  • February 15, 2014 at 2:02 pm #158876
    muradn
    Member
    • Topics: 50
    • Replies: 53
    • ☆☆

    Question : Net profit was calculated 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.
    What is the net profit after correcting this error?

    P.s: Please write the answer with explanation..

    Thanks in advance…

    February 15, 2014 at 2:09 pm #158879
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    If capital expenditure has been treated as revenue expenditure, it means that at the moment there is an expense in the Statement of profit or loss that should not be there.
    So…the correct profit should be 3000 higher.

    If revenue receipts have been treated as capital receipts, then it means there is revenue that should be in the Statement of profit or loss but is not there at the moment.
    So…the correct profit should be 1400 higher.

    So the correct profit here is 10200 + 3000 + 1400

    February 15, 2014 at 2:27 pm #158883
    muradn
    Member
    • Topics: 50
    • Replies: 53
    • ☆☆

    capital receipt is taken account into income statement?? for example if capital receipt is 10000 $ , then will it be added to the gross profit while calculating net profit?

    February 15, 2014 at 2:30 pm #158886
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    That is not what I wrote.

    Revenue receipts should appear in the Statement of profit or loss (it is no longer called the Income Statement).
    Capital receipts do not appear in the Statement of profit or loss.

    This question says that revenue receipts (so should have appeared) have been treated as capital receipts (and therefore are not appearing at the moment)

    February 15, 2014 at 2:34 pm #158890
    muradn
    Member
    • Topics: 50
    • Replies: 53
    • ☆☆

    okk, i supposed capital receipts appears in the Statement of profit or loss. that is why this question seemed so confused to me.. i understood now.. thank you for your helping.. i am grateful to you..

    February 15, 2014 at 2:37 pm #158892
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

    February 25, 2014 at 5:16 pm #160057
    Anonymous
    Inactive
    • Topics: 17
    • Replies: 53
    • ☆☆

    Capital Receipt = not appear
    Revenue Receipt = increases profit
    Capital expenditure = increases profit
    revenue expenditure = decreases profit

    ?

    &
    what is an error called that is BOTH posted in the wrong account, wrong amount or wrong side?

    ?

    thanks!

    February 25, 2014 at 6:05 pm #160062
    Anonymous
    Inactive
    • Topics: 17
    • Replies: 53
    • ☆☆

    continuing my last post (see above)

    wikepedia says a trial balance will not detect a transposition error:

    https://en.wikipedia.org/wiki/Trial_balance

    YET my bpp questions book says it will?

    February 25, 2014 at 6:10 pm #160063
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    With regard to your first post, I am not completely sure what you mean!

    A capital receipt occurs because you have sold a non-current asset. The profit or loss on sale will appear in the Statement of profit or loss (but not the receipt itself).

    A revenue receipt will appear in this statement – it is because we have sold goods.

    Capital expenditure will not affect the profit (unless it has been entered in the wrong account)

    Revenue expenditure certainly will decrease profit.

    An item posted in the wrong account is called an error of commission. There is no special name for the other two errors.

    February 25, 2014 at 6:12 pm #160064
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    With regard to your second post.

    A transposition error might or might not affect the trial balance.

    If, for example, you have entered 120 in one account but by mistake entered 210 in the other account, then the trial balance will not balance (because the debit and credit will be of different amounts).

    However, if the real amount is 120, but you have accidentally entered 210 in both accounts, then the trial balance will still balance (because the debit and credit are of the same amounts).

    February 25, 2014 at 6:35 pm #160065
    Anonymous
    Inactive
    • Topics: 17
    • Replies: 53
    • ☆☆

    ok thanks

    February 25, 2014 at 6:37 pm #160066
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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  • The topic ‘Errors’ is closed to new replies.

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