PRC-1 · Chapter 8 · Question 100 of 100
A business paid Rs. 10,000 for a new computer and mistakenly recorded it as an office expense. If the computer should be depreciated at 20% per annum straight-line (assuming a full year), what is the impact on the net profit when the error is corrected?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Net profit increases by Rs. 8,000
Explanation
Expensing the computer reduced profit by 10,000. The correction reverses this full expense (+10,000) and applies the correct depreciation charge of 2,000 (-2,000), yielding a net profit increase of 8,000.
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