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Accounting - errors in recording transactions?
I'm doing my homework for my accounting 1 class and a little confused about the effects of errors in recording transactions to the trial balance, net income, statement of owner's equity & balance sheet. Need help for the following questions. Can someone help explain please??? Thank you in advance!!!
Assume that ABC Co. erroneously recorded the payment of $5,000 of owner withdrawals as debit to Salary Expense.
a.) How would this error affect the equality the trial balance?
b.) How would this error affect the income statement, statement of owner's equity, and balance sheet?
Assume that ABC Co. borrowed $300,000 from XYZ Bank. In recording the transaction, ABC erroneously recorded the receipt as debit to Cash, $300,00, and credit to Fees Earned, $300,000.
a.) How would this error affect the equality the trial balance?
b.) How would this error affect the income statement, statement of owner's equity, and balance sheet?
correction for ABC Co question.
Cash was debited for $300,000 not $30,000 (I missed a zero).
2 Answers
- smahadevan39Lv 78 years agoFavorite Answer
$5000 Owners Withdrawal
a) The trial balance will tally - as instead of debiting Withdrawal, Salary account is debited
The correction entry should be DR Withdrawal and CR Salary expenses..
b) This will reduce the income to the extend of $5000/ offsetting the mistake in the
Owners equity, which should be $5000 less.
$300,000
a) There will be short of $270,000/ short in the debit side total.
b) Income is shown more by $300,000/ this should be reduced from proift
There is borrowing of $300,000/ which should be shown under Creditors $300,000/
There is a short of cash balance as the receipt is $300,000/ so cash should be added by $270,000/
- Anonymous4 years ago
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