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John Moffat.
John Moffat.-
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kengara
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Hi My Dear tutor, I have another question
A business received a delivery of goods on 29 june 20×6 which was included in inventory at 30 june 20×6.The invoice for the goods was recorded in July 20×6
What effect will this have on the business?
1)Profit for the year ended 30 june 20×6 will be overstated
2)Inventory at 30 june 20×6 will be understated
3)Profit for the year ending 30 June 20×7 will be overstated
4)inventory at june 30 20×6 will be overstatedHere is inventory receipt on 29 june included inventory 30 june 20×6 will increase closing inventory including profit for the year?
John Moffat
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They were correct to include the goods in inventory because they were received before the year end.
They should also have entered the invoice but they have not.
Because they have not entered the invoice, the purchases figure will be too low, and therefore the profit at the moment will be too high / overstated.
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