Accounting · Rectification of Errors
A bookkeeper records a return of goods by a credit customer worth 15,00,000. The bookkeeper incorrectly debits the Purchase Returns Account and credits the Debtors Account. How should the journal entry be corrected and what is the impact of this rectification on the net profit?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Debit Purchase Returns and Credit Sales Returns; the net profit was understated and will now increase.
- 2Debit Sales and Credit Cash; there is no impact on the net profit as both are nominal accounts.
- 3Debit Debtors and Credit Sales; the profit will increase after the rectification entry is passed.
- 4Debit Sales Returns and Credit Purchase Returns; the net profit was initially overstated and will decrease upon correction.✓
Correct answer
Debit Sales Returns and Credit Purchase Returns; the net profit was initially overstated and will decrease upon correction.
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