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JAMB Principles of Accounts 1997 Question 17

Question 17

Correction of Errors and Suspense Account

At the end of a financial period, the trading profit and loss account of a company showed a profit of ₦120 000. It was however discovered that revenue of ₦12 000 was recorded as expenses while expenses of ₦4 000 had been recorded as revenue. What should be the correct profit for the period?

  1. A.₦104 000
  2. B.₦128 000
  3. C.₦136 000
  4. D.₦144 000
Show the answer and explanation

Answer: C (₦136 000)

Explanation

Revenue shown as expense understates profit by 2 × 12 000 = 24 000; expense shown as revenue overstates it by 2 × 4 000 = 8 000. 120 000 + 24 000 − 8 000 = ₦136 000.