Chapter 6, Problem 12E

To determine

Concept:

Errors in Financial Statements:

While errors may occur inadvertently, in preparation of financial statements, the impact of such errors has a cascading effect and can affect multiple elements of financial reporting such as items of the balance sheet and income statements.

Errors may occur in the form of omission of figures, misstatement in reporting of financial figures, errors of principle i.e. recording debits as credits etc. the errors can also carry forward to subsequent periods since the financial statements of one year form the base for subsequent periods.

Requirement 1:

Correct Gross Profit For Years 1, 2, 3.

To determine

Concept:

Errors in Financial Statements:

While errors may occur inadvertently, in preparation of financial statements, the impact of such errors has a cascading effect and can affect multiple elements of financial reporting such as items of the balance sheet and income statements.

Errors may occur in the form of omission of figures, misstatement in reporting of financial figures, errors of principle i.e. recording debits as credits etc. the errors can also carry forward to subsequent periods since the financial statements of one year form the base for subsequent periods.

Requirement 2:

Comparative Income Statement for Years 1, 2 and 3 with the wrong figures.