O-LevelAccountingAccounting procedures7707/12 · May/June 2021 · Q161 Mark

Nia sold equipment with a net book value of $200. The proceeds of the sale, $250, were credited to the sales account and debited in the cash book. What was the effect of this error on Nia's gross profit and profit for the year?

Agross profit: overstated $50, profit for the year: overstated $50

Bgross profit: overstated $200, profit for the year: understated $250

Cgross profit: overstated $250, profit for the year: overstated $200

Dgross profit: understated $250, profit for the year: understated $200

✓ Correct answer

A: gross profit: overstated $50, profit for the year: overstated $50

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Topic: Accounting procedures, O-Level Accounting (syllabus 7707). Multiple choice, 1 mark.
Source: O-Level Accounting, May/June 2021 Paper 1 Variant 2, question 16.

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