Dear Sir, If someone is working ia an Organsation, whose storekeeperlead him wro

Question

Dear Sir, If someone is working ia an Organsation, whose storekeeperlead him wrong information at the end of year because of blindtrust. So my frined record whatever his storekeeper giveninformation as a closing balance of last year. When my friend selfthrough enquired of stock, he found mistake. So I seekinghelp for my friend here if we had not taken last year stock in accounts how to take inthe next year. how to pass the journal entry for the same? Dear Sir, If someone is working ia an Organsation, whose storekeeperlead him wrong information at the end of year because of blindtrust. So my frined record whatever his storekeeper giveninformation as a closing balance of last year. When my friend selfthrough enquired of stock, he found mistake. So I seekinghelp for my friend here if we had not taken last year stock in accounts how to take inthe next year. how to pass the journal entry for the same?

Explanation / Answer

If last year physical closing inventory is more than what hasbeen stated in the final accounts. for example instead of $120,000physical inventory, only $95,000 has been recorded. It means Costof goods sold has been reported more than actual and profit hasbeen shown less by that amount. ____________________________________________________________________ Prior periodadjuments                                                          Debit            $25,000    Retained Earnings orPartners' Capital OrProprietorCapital                                  Credit $25,000 Inventory                               Debit      $25,000    Prior periodadjustment                                       Credit      $25,000 __________________________________________________________________ If last year physical closing inventory is more than what hasbeen stated in the final accounts OR if we had not taken last yearstock in accounts how to take in the next year. how to pass thejournal entry for the same RetainedEarnings               $xxxx    Prior PeriodAdjustments               $xxxx Prior Period Adjustments    $xxxx    Inventory                                       $xxxx _______________________________________________________________________   

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