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Profit for a business was calculated as being $10,200. It was later discovered that capital expenditure of $3,000 had been treated as revenue expenditure, & revenue expenditure of $1,400 had been treated as capital exp.
What should have been the correct profit ?
Revenue expenditure should appear in the Statement of profit or loss, but capital expenditure should not appear.
So to get the correct profit, the capital expenditure of 3,000 needs to be added back (because it should not have been treated as revenue expenditure) and 1,400 needs subtracting (because it should have been treated as revenue expenditure).
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