Errors on the Balance Sheet and Profit and Loss

System

Hi there,

I am studying errors(O.C.P.O.R.C.) but am stuck on a few new questions that i can't work out, example below:

1. What is the effect on the previously calculated profit and the balance sheet of each of the following:

a) Sales account has been overcast by £1,000.00?
Answer: Profit decrease, Balance Sheet profit decrease. I don't really understand it, as i would have thought the extra £1000 would have caused an increase in profits?


2. Depreciation of the vehicles of £1250 for the year has not been made?
Answer: Profit decrease, Balance Sheet profit decrease, vehicles decrease

3. Discounts Received of £135.00 has been omitted?
Answer: Profit increase, Balance sheet increase in profits

Please can someone help me with these as i can't grasp the logic behind them?

Thanks in advance,

Ben.

System

Re:Errors on the Balance Sheet and Profit and Loss

Hi Ben

I think it's the way you are looking at the answer that's causing you the problem. You are right in that an increase in sales would have increased the profit on the P&L and balance sheet, however, they are asking for the effect on the previously calculated profit (i.e the incorrect version) which when you think about it by putting the error right you would indeed decrease the profit back to it's rightful amount. The same would apply to the depreciation question, once the error was adjusted the correct figures would show a profit decrease on the original incorrect figures.

I hope this helps.

Jes