/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Problem 22 The following errors took place ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: Problem 22

The following errors took place in journalizing and posting transactions: a. A \(\$ 940\) purchase of supplies for cash was recorded as a debit to Supplies Expense and a credit to Accounts Payable. b. Cash of \(\$ 2,750\) received on account was recorded as a debit to Fees Earned and a credit to Cash. Journalize the entries to correct the errors. Omit explanations.

Short Answer

Expert verified
Correct the errors by reversing the incorrect entries and recording them correctly.

Step by step solution

01

Identify the Error in Transaction a

In transaction a, a purchase of supplies for cash was mistakenly recorded as a debit to Supplies Expense instead of Supplies, and a credit to Accounts Payable instead of Cash. We need to fix both errors in this transaction.
02

Correct Transaction a

To correct the journal entry for transaction a, we need to debit Supplies instead of Supplies Expense and credit Cash instead of Accounts Payable. Therefore, the correcting entry will be: Debit: Supplies $940 Credit: Supplies Expense $940 Debit: Accounts Payable $940 Credit: Cash $940. This effectively cancels out the original incorrect entry and records it correctly.
03

Identify the Error in Transaction b

In transaction b, cash received was recorded in the wrong accounts. It should have been recorded as a debit to Cash and a credit to Accounts Receivable, but it was recorded as a debit to Fees Earned and a credit to Cash. This needs to be corrected.
04

Correct Transaction b

For transaction b, the incorrect entry needs to be reversed, then re-recorded correctly: Debit: Cash $2,750 Credit: Fees Earned $2,750 Debit: Fees Earned $2,750 Credit: Accounts Receivable $2,750. This reverses the incorrect entry and records it correctly to reflect the cash received on account.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Journal Entries
Journal entries are vital components of financial accounting, as they document every financial transaction within a business. Think of them as a detailed diary of a company's financial life. Each entry typically consists of several key parts: the date of the transaction, the accounts involved, and the amounts debited or credited.
A journal entry begins with identifying which accounts are affected. For instance, if a company buys supplies, this purchase affects both the 'Supplies' account and the account representing the payment method, like 'Cash' or 'Accounts Payable'. The transaction is then recorded with specific debit and credit amounts to these accounts.
  • Ensures accuracy in financial records.
  • Helps in tracking errors and fraud.
  • Forms the basis for preparing financial statements.
Understanding journal entries is key to understanding the whole picture of a company's financial standing.
Financial Transactions
Financial transactions are activities that affect a company's financial statements. They include any exchange involving money or other resources. Every time a company earns revenue, incurs expenses, purchases or sells assets, or engages in other financial activities, a financial transaction takes place.
Each transaction must be recorded accurately in the company's accounting system. Errors in recording can lead to incorrect financial statements. For example, misclassifying a cash purchase may result in underreporting expenses, thus affecting profitability figures.
  • Recording financial transactions accurately ensures compliance with accounting standards.
  • Mistakes like those in the exercise can distort the financial information.
  • Correcting such errors promptly is essential to maintain data integrity.
A keen eye for detail and understanding of basic accounting principles is essential to handle financial transactions effectively.
Debit and Credit
In accounting, the terms 'debit' and 'credit' are fundamental. They are used to record transactions and reflect a dual aspect of any transaction. A debit entry will add to assets or expenses and subtract from liabilities or income, while a credit does the opposite.
Consider two sides to every transaction. For every debit, there must be an equal and opposite credit. This double-entry bookkeeping system ensures that the accounting equation equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \)- always remains balanced.
In correcting the errors from the original exercise, it's crucial to apply debits and credits properly to rectify misclassifications:
  • For the purchase of supplies that was recorded incorrectly, swapping the debit and credit accounts corrected the error while maintaining balance.
  • The same principle applies to correcting misrecorded account cash receipts.
Mastery of debit and credit is essential for ensuring financial accuracy in accounting records.

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The accounts in the ledger of Matice Co. as of July 31, 2008, are listed in alphabetical order as follows. All accounts have normal balances. The balance of the cash account has been intentionally omitted. Chapter 2 Analyzing Transactions \(\begin{array}{lclr}\text { Accounts Payable } & \$ 56,130 & \text { Notes Payable } & \$ 120,000 \\ \text { Accounts Receivable } & 112,500 & \text { Prepaid Insurance } & 9,000 \\ \text { Cash } & ? & \text { Rent Expense } & 180,000 \\ \text { Fees Earned } & 930,000 & \text { Supplies } & 6,300 \\\ \text { Insurance Expense } & 18,000 & \text { Supplies Expense } & 23,700 \\\ \text { Land } & 255,000 & \text { Unearned Rent } & 27,000 \\ \text { Milton Adair, Capital } & 259,920 & \text { Utilities Expense } & 124,500 \\ \text { Milton Adair, Drawing } & 60,000 & \text { Wages Expense } & 525,000 \\ \text { Miscellaneous Expense } & 26,700 & & \end{array}\) Prepare an unadjusted trial balance, listing the accounts in their proper order and inserting the missing figure for cash.

Dazzle School is a newly organized business that teaches people how to inspire and influence others. The list of accounts to be opened in the general ledger is as follows: \(\begin{array}{lll}\text { Accounts Payable } & \text { Miscellaneous Expense } & \text { Supplies } \\ \text { Accounts Receivable } & \text { Prepaid Insurance } & \text { Supplies Expense } \\ \text { Cash } & \text { Rebecca Wimmer, Capital } & \text { Unearned Rent } \\ \text { Equipment } & \text { Rebecca Wimmer, Drawing } & \text { Wages Expense } \\ \text { Fees Earned } & \text { Rent Expense } & \end{array}\) List the accounts in the order in which they should appear in the ledger of Dazzle School and assign account numbers. Each account number is to have two digits: the first digit is to indicate the major classification (1 for assets, etc.), and the second digit is to identify the specific account within each major classification (11 for Cash, etc.).

During the month, Witherspoon Labs Co. has a substantial number of transactions affecting each of the following accounts. State for each account whether it is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries. 1\. Accounts Payable 5\. Insurance Expense 2\. Accounts Receivable 6\. Keith Dupree, Drawing 3\. Cash 7\. Supplies Expense 4\. Fees Earned

The following errors took place in journalizing and posting transactions: a. A withdrawal of \(\$ 20,000\) by Joel Goodson, owner of the business, was recorded as a debit to Wages Expense and a credit to Cash. b. Rent of \(\$ 3,600\) paid for the current month was recorded as a debit to Rent Expense and a credit to Prepaid Rent. Journalize the entries to correct the errors. Omit explanations.

The following table summarizes the rules of debit and credit. For each of the items (a) through (l), indicate whether the proper answer is a debit or a credit. \begin{tabular}{lccc} & Increase & Decrease & Normal Balance \\ \hline Balance sheet accounts: Asset & & \\ Liability & (a) & Credit & (b) \\ Owner's equity: & (c) & (d) & Credit \\ \(\quad\) Capital & Credit & (e) & (f) \\ Drawing & (g) & (h) & Debit \\ Income statement accounts: & & (j) & (k) \\ Revenue & (i) & (l) & Debit \\ Expense & Debit & (h) \end{tabular}
See all solutions

Recommended explanations on Math Textbooks

Geometry

Read Explanation

Calculus

Read Explanation

Logic and Functions

Read Explanation

Probability and Statistics

Read Explanation

Statistics

Read Explanation

Decision Maths

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.