Asked by Andrew Oriold on Jul 27, 2024
Verified
John, a new employee, is not sure of the effect the following unrelated situations would have on the accuracy of the financial statements. Identify the account(s) that are affected and if the trial balance would balance.
a. Equipment was purchased for $900 cash. The debit was recorded properly, but the credit was omitted.
b. A debit to Cash for $250 was posted as $2,500; the credit was posted correctly.
c. A purchase of supplies on account for $75 was posted as a debit to Supplies and a credit to Cash.
Financial Statements
Reports that summarize the financial health, performance, and cash flows of a business for a specific period, typically including the balance sheet, income statement, and cash flow statement.
Debit
An accounting entry that results in either an increase in assets or a decrease in liabilities or equity on a company's balance sheet.
Credit
A bookkeeping record that enhances a liability or equity balance, or diminishes an asset or expenditure balance.
- Identify and correct errors in the recording and posting of accounting transactions.
- Recognize the importance of accuracy in financial statements and identify the consequences of errors.
Verified Answer
KC
Kassu ChathuJul 28, 2024
Final Answer :
a. Cash is overstated by $900; the debit side is $900 greater than the credit side on the trial balance. The trial balance would not balance.
b. Cash is overstated by $2,250; the debit side is $2,250 greater than the credit side on the trial balance. The trial balance would not balance.
c. Accounts Payable and Cash are both understated by $75. The trial balance would balance.
b. Cash is overstated by $2,250; the debit side is $2,250 greater than the credit side on the trial balance. The trial balance would not balance.
c. Accounts Payable and Cash are both understated by $75. The trial balance would balance.
Learning Objectives
- Identify and correct errors in the recording and posting of accounting transactions.
- Recognize the importance of accuracy in financial statements and identify the consequences of errors.