Question

Instruction Chart of Accounts General Journal Instruction The following errors took place in journalizing and posting transactions: a. Dividends of $5,000 were recorded as a debit to Office Expense and a credit to Cash. b. Accounts receivable payment for $7,800 was recorded as a debit to Cash and a credit to Fees Eamed. Required: Journalize the entries to correct the errors. Refer to the Chart of Accounts for exact wording of account titles. Previous

Answer 1

1. The correct entry for dividend payment is

Retained Earnings a/c Dr	5000
To Cash a/c		5000

Hence one part ie credit to cash is all right. So rectifying entry is:

Retained Earnings a/c Dr	5000
To Office expense a/c		5000

By crediting office expense account, we nullify the effect of the erroneous entry. And we debit to Retained earnings to rectify the error.

2. Since the monies are received from the Accounts Receivable, we have already recorded the fees earned on accrual basis. Hence the entry for receiving cash is:

Cash a/c Dr	7800
To Accounts Receivables		7800

Hence, the rectifying entry is:

Fees earned a/c Dr	7800
To Accounts Receivables a/c		7800