Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2015 when it should have been recorded in 2016.The company's income tax rate is 40 per cent and there was no corresponding error in cost of goods sold.
-What is the effect of the error on 2015 cash from operations?
A) There is no cash effect.
B) It is $1200 too high.
C) It is $1800 too high.
D) It is $3000 too high.

Question

Quizplus · Accepted Answer

The error in recording the invoice as revenue in 2015 instead of 2016 does not affect cash from operations because it is an accounting error related to the timing of revenue recognition, not an actual cash transaction.

Leslie Ltd Has Found an Error in Its Revenue Account