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MGT101 Financial Accounting GDB Spring 2020 Solution & Discussion

MGT101 Financial Accounting GDB 1 Solution & Discussion Spring 2020


Topic to be tested:

  • Financial Statements

 

Learning Objectives:

  • To understand the presentation of Profit and loss account/Income statement.

 

GDB Question:

Mr. Waseem is working as an accountant in a business organization under the name of ABC Brothers. He has recently prepared financial statements by using the data available in Trial Balance of ABC Brothers and he has presented the financial statements to the Manager accounts of the organization. Manager accounts observed the following errors in the income statement prepared by Mr. Waseem, which produce inaccurate financial affairs of business.

  1. Carriage inwards of Rs. 35,000 wrongly reported under the head of selling expenses.
  2. Carriage outwards of Rs. 15,000 wrongly reported under the head cost of goods sold.
  3. Selling expenses of Rs. 20,000 wrongly reported under the head of administration expenses.
  4. Financial expenses of Rs. 13,000 wrongly reported under the head of selling expenses.

 

Required:

  1. What will be correct amount of Gross profit, if Gross profit before correcting the given errors was Rs. 335,000?
  2. What will be correct amount of Cost of goods sold, if the reported amount of sales was Rs. 400,000?
  3. What will be the effect of error “ Carriage inwards of Rs. 35,000 wrongly reported under the head of selling expenses” on Cost of goods sold? (Just mention whether the Cost of goods sold would be overstated, understated or remains unaffected)
  4. What will be the effect of given errors on net profit? (Just mention whether the net profit would be overstated, understated or remains unaffected)

 

Important Instructions: Note: Be concise and avoid unnecessary detail to attempt the given questions.

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Replies to This Discussion

MGT101_GDB_Solution_Spring_2020

Download the file, Click on the below link

MGT101_GDB_Solution_Spring_2020

MGT101 Financial Accounting GDB 1 Solution & Discussion Spring 2020


Another solution idea of MGT101:

 

 

 

Sales

400,000

GF

(335,000)

CGS before correcting

65,000

add

carriage inward

35,000

less

carriage outward

(15,000)

 

Cost of goods sold after correcting the error

 

85,000

Gross profit after correcting the error

315,000

  • Cost of goods sold will be understated
  • Net profit will be overstated

 

Hint :- Carriage inward is a part of cost of goods sold not selling expense Carriage outward is part of selling expense not a cost of goods sold.

Solution given by Tariq sir is correct

MGT101 GDB Solution Spring 2020

 

Sales                                                                           400000

Cost of good sold                                                   85000

   Gross profi                                                           315000

   Less Administration     

Less Selling   15000+20000                                35000

Less Finanice  13000                                              13000      

Net profit                                                                267000

 

Cost of good sold will be overstated after the correction  of  Carriage inwards 35000

Net profit will be understated after all the correction and overall affect

 

MGT101_GDB_Solution

link below 

MGT101_GDB_Solution

GDB Question:
Mr. Waseem is working as an accountant in a business organization under the name of ABC Brothers. He has recently prepared financial statements by using the data available in Trial Balance of ABC Brothers and he has presented the financial statements to the Manager accounts of the organization. Manager accounts observed the following errors in the income statement prepared by Mr. Waseem, which produce inaccurate financial affairs of business.
Carriage inwards of Rs. 35,000 wrongly reported under the head of selling expenses. Carriage outwards of Rs. 15,000 wrongly reported under the head cost of goods sold. Selling expenses of Rs. 20,000 wrongly reported under the head of administration expenses. Financial expenses of Rs. 13,000 wrongly reported under the head of selling expenses.

SOLUTION.
A. Carriage towards of Rs. 35,000 wrongly reported under the head of selling expenses. B. Carriage Outwards of Rs. 15,000 wrongly reported under the head cost of goods sold. C. Selling Expenses of Rs. 20,000 wrongly reported under the head of administration expenses. D. Financial Expenses of Rs. 13,000 wrongly reported under the head of selling expenses.
What will be correct amount of Gross profit, if Cross profit before correcting the given errors was Rs. 335,000?

Gross Profit 335,000
Less Carriage Inward 35,000
Gross Profit 300,000

Income Statement:
Sales XXX
Less CGS XXX

Gross Profit XXX
Less Selling Exp. XXX
Less Admin Exp. XXX

Net Profit XXX

GDB sol 

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