What will be the effect of first adjustment?
Dear Student
Effect of 1st Adjustment :
Shed constructed for Rs 40,000 charged to revenue account means it has been accounted as expense. THerefore we have to rectify this error and recompute the profit as follows :
Now this adjusted profit would be taken into account for calculating average profits and goodwill.
Hope this helps , Please get back to us for any query
Keep posting
Regards
Effect of 1st Adjustment :
Shed constructed for Rs 40,000 charged to revenue account means it has been accounted as expense. THerefore we have to rectify this error and recompute the profit as follows :
Profit for the Year 2012 | 25,000 |
Add : Shed charged to profit and loss account | 40,000 |
Less : Depreciation @ 10% P.A for 6 months | 2,000 |
Adjusted profit for the year 2012 | 63,000 |
Now this adjusted profit would be taken into account for calculating average profits and goodwill.
Hope this helps , Please get back to us for any query
Keep posting
Regards