PRC-1 · Chapter 8 · Question 84 of 100
Transportation outward, amounting to Rs. 240,000, was recorded as transportation inward. What is the effect of correcting this error on Gross Profit and Net Profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Increase in gross profit Rs. 240,000 & Net profit No effect
Explanation
Transportation inward reduces Gross Profit, while outward reduces Net Profit. Shifting the 240,000 expense from inward to outward removes the hit from GP (GP increases) but still deducts it before Net Profit, so NP remains unaffected.
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