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Assume that Sunshine Realty Co. borrowed $300,000 from Columbia First Bank and Trust. In recording the transaction. Sunshine erroneously recorded the receipt as a debit to Cash, $300,000, and a credit to Fees Earned, $300,000. (a) How would this error affect the equality of the trial balance? (b) Mow would this error affect the income statement, statement of stockholders’ equity, and balance sheet?
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
Assume that Sunshine Realty Co. borrowed $300,000 from Columbia First Bank and Trust. In recording the transaction. Sunshine erroneously recorded the receipt as a debit to Cash, $300,000, and a credit to Fees Earned, $300,000. (a) How would this error affect the equality of the trial balance? (b) Mow would this error affect the income statement, statement of stockholders’ equity, and balance sheet?
(a)
Identify the manner in which the given error would affect the equality of the trial balance.
Explanation of Solution
Errors not affecting trial balance:
An error is a mistake committed in the process of book-keeping or in accounting. In some cases, errors may occur but, they will not affect the totals of the trial balance. Such an error can be found while preparing the trial balance or would be indicated by the unusual account balance. For Example, Crediting land account...
(b)
Discuss the manner in which the error would affect the income statement, retained earnings statement, and the balance sheet.
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