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- This topic has 1 reply, 2 voices, and was last updated 2 months ago by John Moffat.
- January 16, 2023 at 2:22 am #676293snehamaharjaParticipant
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- Replies: 3
A business received a delivery of goods on 29 June 2013, which was included in inventory at 30 June 2013
The invoice for the goods was recorded in July 2013.
What effect will this have had on the business?
A-Inventory at 30 June will be understated
B-Inventory at 30 June 2013 will be overstated
C-Profit for the year ended 30 June 2013 will be overstated
D-Profit for the year ended 30 June 2014 will be overstated
Sir , it’s answer is C
Here , purchased have under stated and profit have over stated …
Can you please explain me how it under stated and over stated and explain this question ???January 16, 2023 at 7:59 am #676404John MoffatKeymaster
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Because the delivery was received before the year end of 30 June, the invoice should also have been accrued for and recorded.
That means that the purchases figure should be higher (so at the moment it is understated i.e. is lower than what it should be), and therefore the profit should be lower (at the moment it is overstated i.e. higher than what it should be).
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