Should I credit the correct cost price (5481.81)on the cost of sales account?
ScanSolve AI Answer
Answer
Yes, you should credit the Cost of Sales account with the correct cost price of R5 481.81.
Step-by-step solution
3 stepsLet's clarify the adjustment for the Cost of Sales account based on the scenario:
The original transaction was recorded as:
- Debit Cost of Sales: R5 481.81 (the correct cost price, as per our previous discussion and the implication that the entry was balanced but to the wrong accounts)
- Credit Trading Inventory: R5 481.81 (the correct cost price)
The correct entry for drawings of inventory should have been:
- Debit Drawings: R5 481.81
- Credit Trading Inventory: R5 481.81
Identify the incorrect entry made to the Cost of Sales account.
The Cost of Sales account was incorrectly debited with R5 481.81.
Determine the correct treatment for the Cost of Sales account.
For drawings of inventory, the Cost of Sales account should not be affected. It should have had a R0 entry.
Calculate the adjustment needed for the Cost of Sales account.
To reverse the incorrect debit of R5 481.81 to the Cost of Sales account, you need to make a credit entry of the same amount.
Therefore, the recommended adjustment for the Cost of Sales account is a credit of R5 481.81. This will remove the incorrect debit from the account.
(My apologies for the conflicting information in the previous response regarding the amount debited to Cost of Sales. The interpretation that the Cost of Sales was debited with the cost price, R5 481.81, is consistent with the typical balancing of journal entries and our earlier discussion.)
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