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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

Determine the effect of the following errors on a company’s total revenue, total expenses, and net income. Indicate the effect by writing O for Overstated (too much), U for Understated (too little), or NA for Not Affected.

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To determine

Indicate the effect of error while journalizing the transactions on total revenue, total expenses, and net income as O (Overstated), U (Understated), and NA (Not Affected).

Explanation

Journalizing transaction: The process of recording transactions in a journal is known as journalizing transactions.

Indicate the effect of error while journalizing the transactions on total revenue, total expenses, and net income as O (Overstated), U (Understated), and NA (Not Affected).

TransactionsTotal RevenueTotal ExpensesNet IncomeDescription
a.ONAOThe accountant should have debited Cash account and credited Accounts Receivable account. Since the Cash account is debited correctly, but Professional Fees is credited incorrectly, total revenue and net income are overstated, and total expenses are not affected.
b.NAOUThe accountant should have debited Drawing account and credited Cash account. Since the Cash account is credited correctly, but Salary Expense is debited incorrectly, total expenses are overstated, net income is understated, and total revenue is not affected...

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