In preparing the financial statements of Fadekemi Retailers for the year ended 31 December 2023, the accountant discovered that rent expense of ₦180,000 had been debited to the Rent Receivable Account. Before the correction of this error, the reported net profit was ₦2,450,000. What is the corrected net profit?

The rent expense of ₦180,000 was incorrectly debited to Rent Receivable (an asset account) instead of Rent Expense. This means rent expense was understated by ₦180,000, causing net profit to be overstated by ₦180,000. Additionally, since the Rent Receivable account was debited instead of Rent Expense, the income side was unaffected but expenses were reduced. The correct net profit = ₦2,450,000 – ₦180,000 (understated expense) – ₦180,000 (Rent Receivable must now be reversed, reducing assets, not affecting profit again). Correcting: only the expense understatement affects profit — corrected net profit = ₦2,450,000 – ₦360,000 = ₦2,090,000, because reversing the wrong debit to Rent Receivable removes ₦180,000 from assets and recording it as Rent Expense reduces profit by ₦180,000, giving a total profit reduction of ₦360,000 from the original misposting.