Question

Closing stock was overstated by Rs. 9,000 being casting error in the schedule of inventory, If this error located after preparation of final account then which of the following rectification entry is correct?

• A. stock A/c Dr. 9,000
  To Suspense A/c 9,000
• B. Suspense A/c Dr. 9,000
  To Stock A/c 9,000
• C. Stock A/c Dr. 9,000
  To Profit & Loss Adj. A/c 9,000
• D. Profit & Loss Adj. A/c Dr. 9,000
  To Stock A/c 9,000

Answer 1

The correct option is D Profit & Loss Adj. A/c Dr. 9,000

To Stock A/c 9,000
Closing stock always has a debit balance as it is an asset. Since the value of stock is overcast it has to be credited to cancel the amount of overcast.

Since the error is detected after preparation of final account profit and loss adjustment A/c will be debited.