What information do I need to consider when doing an income statement and the fo

Question

What information do I need to consider when doing an income statement and the following has occured, One client had indicated that theywere interested in purchasing $45,500 worth of products , so the bookkeeper recorded the transaction. However, the client has not actually committed to the prchased. So the bookkeeper already corrected the salesaccount, however, the bookkeeper may have madea mistake when computing cost of goods sold. She indicated total production costs for 2012 and did not adjust ending inventory for the $45, 500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical cost. What additional information needs to be considered. I have to explain adjustments seperately

Explanation / Answer

The following corrections need to be made: 1. Since there results no actual sale, hence that should be removed from sales account, but that has already been corrected. The only mistake is in the cost of goods sold account which should be now reduced by 45500 because those goods are not actually sold. 2. Since the closing inventory was by using a physical cost, hence this needs no adjustment. Please consider the time devoted to make this reply by rating this as 5 star. Thank u in advance. God bless u :)

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