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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

Following is a trial balance prepared just before you were hired. Two accounts are missing, and the amount for Sales is off. Here are a few facts to consider. Our business is in a state that collects sales tax. I ran some totals, and we collected $1,800 in sales tax. Customers returned $900 in goods, which would reduce the above sales tax by $70. Our books need to reflect these events. The former accounting clerk said that she recorded everything—somewhere. She said that she may have credited the $1,800 sales tax to Sales and not to Sales Tax Payable. And she looked confused when Sales Returns and Allowances was mentioned. She asked, “Why not just debit Sales?” Determine the two missing accounts and correct the accounts that are off.

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  1. 1. Think about where these amounts might have been put, think about what accounts are missing, and use T accounts to solve the problems.
  2. 2. Prepare a corrected trial balance.

1.

To determine

Identify the accounts that are missing and use T-accounts to solve the issues.

Explanation

T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit.

The error and their rectification are as follows:

Error 1: Most probably, the bookkeeper would have recorded $1,800 in sales tax as a credit to sales. The Sales Tax Payable should have a credit balance of $1,730($1,800 (collected)$70 (customer returns)).

Correction: Since, the sales tax payable account has been omitted, the sales account should be debited by $1,800, and the Sales Tax Payable should be credited by $1,800

2.

To determine

Prepare the corrected trial balance.

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