A company had to pay 15 million in respect of customers claims for injuries suffered from goods
Question:
A company had to pay £15 million in respect of customers’ claims for injuries suffered from goods manufactured and sold in the previous year. When preparing the financial statements for the previous year the company was not aware of it, nor did they provide for these damages. How should the company report the amount paid?
(a) In the current year’s Statement of income, describing it as an extraordinary item
(b) In the Statement of changes in equity as a deduction from balance brought forward
(c) In the current year’s Statement of income, included as part of Administration expenses
(d) On the Statement of financial position as a deduction from the total of Equity and reserves
Step by Step Answer:
Financial Accounting An Introduction
ISBN: 9780273737650
2nd Edition
Authors: Mr Barry Elliott, Mr Augustine Benedict