O-LevelAccountingPreparation of financial statements7707/12 · Oct/Nov 2024 · Q141 Mark
Hamid owns a grocery store. He bought a motor vehicle, $2000, and fuel, $50. Both of these amounts were incorrectly debited to the purchases account. What was the effect of this error on the income statement for the year?
Agross profit: overstated $2000, motor vehicle expenses: overstated $2050
Bgross profit: overstated $2050, motor vehicle expenses: overstated $50
Cgross profit: understated $2000, motor vehicle expenses: understated $2050
Dgross profit: understated $2050, motor vehicle expenses: understated $50
✓ Correct answer
D: gross profit: understated $2050, motor vehicle expenses: understated $50
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