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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 2013 will be overstated
B) inventory at 30 june 2013 will be understate
C) profit for the year end 30 june 2013 will be overstated.can u explain the answer comprehensively please?
and also can u tell me when sales accur? sales happens when we receive the invoice or goods?
It is a purchase, not a sale, and it occurs when we receive the goods which is in June.
At 30 June we had the goods and so it was correct to show them in inventory (and so A and B are not correct)
However, we had not recorded the purchase. This mean that our purchases figure is too low and therefore the profit too high. (Therefore C is correct)
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