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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Would the following errors cause the trial balance to have equal or unequal totals? As a result of the errors, which accounts are overstated (by how much) or understated (by how much)?

  1. a. A purchase of office equipment for $380 was recorded as a debit to Office Equipment for $38 and a credit to Cash for $38.
  2. b. A payment of $280 to a creditor was debited to Accounts Receivable and credited to Cash for $280 each.
  3. c. A purchase of supplies for $245 was recorded as a debit to Equipment for $245 and a credit to Cash for $245.
  4. d. A payment of $76 to a creditor was recorded as a debit to Accounts Payable for $76 and a credit to Cash for $67.

To determine

State whether the following errors causes the trial balance to have equal or unequal totals and ascertain the accounts that are overstated or understated.

Explanation

Trial balance:

Trial balance is the summary of accounts, and their debit and credit balances at a given time.  It is usually prepared at end of the accounting period.  Debit balances are listed in left   column and credit balances are listed in right column.  The totals of debit and credit column should be equal.  Trial balance is useful in the preparation of the financial statements.

a. A purchase of office equipment for $380 was recorded as a debit to Office Equipment for $38 and a credit to Cash for $38.

The trial balance will have equal totals since office equipment is debited by $38 and cash is credited by $38. Here, the correct amount is $380, office equipment is understated by $342 and cash is overstated by $342.

b. A payment of $280 to a creditor was debited to Accounts Receivable and credited to Cash for $280 each.

The trial balance will have equal totals since accounts receivable is debited with $280 and cash is credited with $280...

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