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WAEC Financial Accounting 1993 Question 3

Question 3

Final Accounts of a Sole Trader

Return inwards was understated. The effect is that

  1. A.amount of goods available was understated.
  2. B.cost of sales was understated.
  3. C.amount of purchases returns was understated
  4. D.amount of sales was understated
  5. E.amount of sales returns was understated.
Show the answer and explanation

Answer: E (amount of sales returns was understated.)

Explanation

Returns inwards are sales returns; understating them understates sales returns (and so overstates net sales and gross profit).