Accounting Multiple Choice Question – 16 June 2023

The directors of lucy Ltd are completing the accounts for the year ended 31 December 2022.

They discover that the Inventory at the start of the financial year at 1 January 2022 was over-valued by £100k.

What is the effect of correcting this error in the accounts?

Select ONE answer:

1. Profit for the year ended 31 December 2022 DECREASE & Revenue reserves brought forward as at 1 January 2022 DECREASE
2. Profit for the year ended 31 December 2022 DECREASE & Revenue reserves brought forward as at 1 January 2022 INCREASE
3. Profit for the year ended 31 December 2022 INCREASE & Revenue reserves brought forward as at 1 January 2022 DECREASE
4. Profit for the year ended 31 December 2022 INCREASE & Revenue reserves brought forward as at 1 January 2022 INCREASE

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
4. Not correct

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