Question

In posting a cash payment on account to a supplier of $1,800, the bookkeeper correctly credited cash for $1,800 but forgot to make the appropriate entry to accounts payable. What is the impact of this error on the trial balance, the cash account, and the accounts payable account?

Group of answer choices

The credit side of the trial balance would be $1,800 higher than the debit side of the trial balance, cash would be correctly stated, and accounts payable would be overstated by $1,800

The trial balance would be in balance, cash would be correctly stated, and accounts payable would be understated by $1,800

The debit side of the trial balance would be $1,800 higher than the credit side of the trial balance, cash would be correctly stated, and accounts payable would be overstated by $1,800

The credit side of the trial balance would be $1,800 lower than the debit side of the trial balance, cash would be correctly stated, and accounts payable would be understated by $1,800

The trial balance would be in balance, cash would be correctly stated, and accounts payable would be overstated by $1,800

Answer 1

The correct Answer is : The credit side of the trial balance would be $1,800 higher than the debit side of the trial balance, cash would be correctly stated, and accounts payable would be overstated by $1,800.

The Entry that should have been passed is :

                                          Accounts payable A/c Dr                $1,800

                                                         To Cash A/c                                $1,800

The accounts payable a/c is a current liability and it have a credit balance.

The Cash a/c is a current asset and it have a debit balance.

So when the suppliers are paid in cash the cash account should be credited in order to reduce the cash balance and at the same time the accounts payable should be debited to reduce the amount payable.

In the given case, the bookkeeper correctly credited the cash account for $1,800 but forgot to make approriate entry i.e. debit the accounts payable a/c by $1,800.

This will result in overstate of $1,800 in accounts payable a/c.

The balance of Accounts payble a/c is shown in the credit side of Trial balance.

Therefore, the credit side of the trial balance will be $1,800 higher than the debit side of the trial balance. The cash account will be correctly stated and accounts payable will be overstated by $1,800.

A rectification entry can be passed by debiting the Accounts payable a/c by $1,800