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McIntyre Company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The cash account as of December 31 has a credit balance of $1,850, and there is no undeposited cash on hand. (A) Assuming no errors occurred during journalizing or posting, what caused this unusual balance? (B) Is the $1,850 credit balance in the cash account an asset, a liability, stockholders’ equity, a revenue, or an expense?

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 2, Problem 3DQ
Textbook Problem
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McIntyre Company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The cash account as of December 31 has a credit balance of $1,850, and there is no undeposited cash on hand. (A) Assuming no errors occurred during journalizing or posting, what caused this unusual balance? (B) Is the $1,850 credit balance in the cash account an asset, a liability, stockholders’ equity, a revenue, or an expense?

(a)

To determine

Owner withdrawals:

Owner withdrawals refer to the withdrawals of money by the owner from the business for his/her personal use. This decreases the owner’s equity account. As owner’s drawing account is increased by debits, and decreased by credits, it has a normal debit balance.

To discuss:  The cause of the unusual balance of the cash account with a credit balance of $1,850, assuming that no errors have occurred during journalizing, and posting.

Explanation of Solution

Assuming that no errors have occurred during journalizing, and posting the unusual balance of the cash account wi...

(b)

To determine

To identify: Whether the credit balance of $1,850 in the cash account is an asset, a liability, owner’s equity, revenue, or an expense.

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Chapter 2 Solutions

Financial & Managerial Accounting
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