Example 2:

Example2:

In a firm, its income statement showed a net profit amounted to L.E. 40,000. Upon examining the sales figure, it was revealed that :

There were sales for the value of L.E. 3,000 which were made at beginning of the new period and were delivered on same date. Yet they were entered in the sales of the current year although they were included as part of inventory at cost.

 Goods sent to commission-agent, amounting to L.E. 7,000 were also entered as being actual sales, without entering them in inventory noting that their cost amount to L.E. 5,500.

Some goods costing L.E. 1,200 sold for the amount of L.E. 1,400 were actually returned during the year, without being recorded as sales returns and were not entered as part of the inventory.

Required: Illustrate the previous transaction effect on determining the tax base.

solution: