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MGT101 GDB 1 Solution

The document discusses a graded discussion board question for an accounting course. It describes errors made by an accountant, Mr. Waseem, in preparing the income statement for a business. The manager observed carriage inwards was incorrectly reported as a selling expense, carriage outwards as cost of goods sold, selling expenses as administration expenses, and financial expenses as selling expenses. Students are asked what the correct gross profit and cost of goods sold amounts would be after correcting the errors, and the effect of the errors on cost of goods sold and net profit.

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839 views3 pages

MGT101 GDB 1 Solution

The document discusses a graded discussion board question for an accounting course. It describes errors made by an accountant, Mr. Waseem, in preparing the income statement for a business. The manager observed carriage inwards was incorrectly reported as a selling expense, carriage outwards as cost of goods sold, selling expenses as administration expenses, and financial expenses as selling expenses. Students are asked what the correct gross profit and cost of goods sold amounts would be after correcting the errors, and the effect of the errors on cost of goods sold and net profit.

Uploaded by

abid prince
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MGT101 - Financial Accounting Graded Discussion Board

Total Marks 4

Starting Date Tuesday, June 02, 2020

Closing Date Monday, June 08, 2020


Status Open

Question Title GDB-01

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.

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.
Required:
What will be correct amount of Gross profit, if Gross profit before correcting the
given errors was Rs. 335,000?

What will be correct amount of Cost of goods sold, if the reported amount of
sales was Rs. 400,000?

What will be the effect of error “A. 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)

What will be the effect of given errors on net profit? (Just mention whether the
net profit would be overstated, understated or remains unaffected)

Solution:

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 85,000
correcting the error
Gross profit after 315,000
correcting the error

• Cost of goods sold will be understated

• Net profit will be overstated

Note: -

If you found any mistake then correct ur self I am not responsible in case of zero
marks

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

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