Accounting · Final Accounts
A specialized bank client deals in high-value electronic equipment and often sends goods to potential buyers on an 'approval or return' basis. On December 25, 2024, the client sent equipment worth 5,00,000 rupees to a customer, which was recorded as a regular sale in the journal. As of the financial year end on March 31, 2025, the customer has not yet communicated their decision, and the approval period is still open. The cost price of the equipment is 4,00,000 rupees. How should this transaction be adjusted in the final accounts?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1No adjustment is needed since it was already recorded as a sale.
- 2Reverse the sale of 5,00,000 and add 4,00,000 to the closing stock at cost.✓
- 3Reverse the sale of 5,00,000 and add 5,00,000 to the closing stock.
- 4Reduce the sales by 1,00,000 to reflect the unrealized profit only.
Correct answer
Reverse the sale of 5,00,000 and add 4,00,000 to the closing stock at cost.
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