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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 And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
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.

  1. (A)  Assuming no errors occurred during journalizing or posting, what caused this unusual balance?
  2. (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

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

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...

(b)

To determine

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 And Managerial Accounting
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