After calculating your company's profit for 20X1, you discover that:
(i) A non-current asset costing £50,000 has been included in the purchases account
(ii) Stationery costing £10,000 has been included as closing inventory of raw materials instead of stock of stationery.
These two errors have had the effect of:

Question

Quizplus · Accepted Answer

The non-current asset should not affect gross profit, but it does affect net profit by £50,000. The stationery error understates gross profit by £10,000. Thus, gross profit is understated by £40,000 (£50,000 - £10,000) and net profit by £50,000.

After Calculating Your Company's Profit for 20X1, You Discover That