PRC-1 · Chapter 8 · Question 72 of 100
A company constructed a building. A junior accountant mistakenly capitalized an inauguration party expense of Rs. 15,000 as part of the building cost. What journal entry corrects this specific error (ignoring depreciation)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Entertainment Expense Rs. 15,000, Credit Building Rs. 15,000
Explanation
Inauguration expenses are revenue expenses. To correct the false capitalization, remove the amount from the Building account (Credit) and recognize the expense (Debit Entertainment Expense).
More Correction of Errors MCQs
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