Question

$Rs.4500$ spent on repair of office equipment debited to office equipment a/c.On rectification of profit and loss a/c ________.

• A. Profit decrease by $Rs.4500$
• B. Understate profit by $Rs.4500$
• C. No affect at all
• D. Debtors a/c will be overcast by $Rs.4500$

Answer 1

The correct option is A Profit decrease by $Rs.4500$

Repairs & Maintenance is a revenue expenditure. This has to be debited to expenses account in profit & loss account. Rectification entry will be passed as under:

Profit & Loss A/c Dr. 4500

To Office Equipment 4500

This will result a decrease of profit by Rs.4500.