Net profits were calculated as being £20,400. It was discovered that revenue receipts of £2,800 had been treated as capital receipts and capital expenditure of £6,000 has been treated as revenue expenditure.
The correct net profit should have been:

Question

Quizplus · Accepted Answer

The correct net profit should be recalculated by reversing the errors: adding back the £2,800 (since it was incorrectly deducted as a capital receipt) and subtracting the £6,000 (since it was incorrectly added as revenue expenditure). So, the corrected net profit is £20,400 + £2,800 - £6,000 = £17,200. However, since the £6,000 was initially treated as an expense (reducing profit), to correct this, we actually need to add it back, not subtract. Therefore, the correct adjustment is £20,400 + £2,800 + £6,000 = £29,200.

Net Profits Were Calculated as Being £20,400