Question

You are told the column totals in a trial balance are not equal. After careful analysis, you discover only one error. Specifically, a correctly journalized credit purchase of an automobile for $9,650 is posted from the journal to the ledger with an $9,650 debit to Automobiles and another $9,650 debit to Accounts Payable. The Automobiles account has a debit balance of $22,870 on the trial balance. Answer each of the following questions and compute the dollar amount of any misstatement.

Answer 1

1) When any asset is purchased on credit , the asset should be debited and accounts payable should be credited.
Here purchased automobile on credit, hence debit automobile and credit accounts payable
while posting journal to ledgers an amount of $9650 is debited to automobile and same amount is credited to accounts payable
But here $9650 was debited to accounts payable , That was wrong done in accounts payable ledger
Due to wrong debit of $9650 accounts payable account was understated.
2)
a) An amount of $9650 is wrongly debited instead of credit , Hence trial balance debit column was overstated.
b) Credit column of trial balance will be understated due to above explained wrong thing.
c) there is no involvement of office equipment account, Hence this account cant be affected, eithere overstated or understated.
d) An amount of $9650 is not credited, Balance of accounts payable in the trial balance will be understated.
	Account status	Amount
a	Over stated	9650
b	Understated	-9650
c	Correctly stated	0
d	Understated	-9650
e) Calculate the balance of credit column before adjustment :
If the adjustment is made balance of debit column after adjustment will be equal to balance of credit column after adjustment
Hence balance debit column after adjustment should be calculated first.
Balance of debit column after adjusment is calculated as follows :
Balance of debit column before adjustment					$ 202,650.00
Less : Wrong debit					$    9,650.00
Balance of debit column after adjustment					$ 193,000.00
An amount of 9650 not credited , hence to get balance of credit column before adjustment the amount should be decuted from balance credit column after adjustment
balance of credit column after adjustment					$ 193,000.00
Less : wrong debit					$   (9,650.00)
balance of credit column before adjustment					$ 183,350.00