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inventory of stationary costing of 240 $ has been ignored in the trial balance.. how to correct the entry?
correct answer : Dr Stationary of inventory – 240 $
Cr Expense – 240 $
why?but i thought it would be Dr – expense, Cr – cash.. ? which one is correct?
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isn’t a suspense account involved here?
During the year they will have been buying stationery. Suppose they bought stationery for $1000 (the amount does not matter – this is just to explain).
The entry will have been Dr Stationery expense; Cr Cash
At the end of the year there is a Dr of $1000 for the expense on the trial balance.
However, they did not use all the stationery – $240 of it is still in inventory.
So……the cost of what they actually used is 240 less, and 240 needs to appear on the Statement of financial position as an asset.
Cr Stationery expense; Dr Inventory of stationery.
Now we have the correct expense for the amount actually used, and we have the asset balance for the Statement of financial position.
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