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An item that is included in Closing inventory has also been included in sales and receivables, and in purchases and payables.
assuming that items are not legally sold until they are dispatched, what adjustments are needed in the F/S?
Your answer is NO change to Inventory, Reduce Sales and Receivables; No change to Purchases and Payable.
Can you please explain this as I always get this question wrong.
Thanks
So, if in closing inventory, must be in purchases and payables (or paid for). That seems OK.
If in closing inventory, it has not been sold yet it is in sales and receivables. Inventory is correct (the item has been included as it has not been sold) but sales and receivables are wrong, so need to be reduced.
Whatever happens the item cannot be simultaneously be in inventory AND sold.
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