Question

For this handout I’m supposed to find what the error is in each problem and make corrections to the account balance in the end. I want to know for Q3 why is $180 added and subtracted from just the debit side. I get why it’s added bc the wrong amount was entered but why subtract it on the debit side after adding it?

Handout1 he December 31 trial balance for the Alpha Company does not balance. You have been asked to find the rrors and provide Alpha with a correct trial balance. After examining the books, you discover the following rors: 1. The Cash account balance of $3,240 was listed in the credit column of the trial balance. 2. The Unearned Service Revenue account balance of $2,500 was listed in the debit column of the trial balance. 3. Payment received from a customer was debited to Cash and credited to Accounts Receivable for $680. 4. 5. 6. 7. When the Unearned Service Revenue account was reviewed, it was found that $725 of the balance was 8. The actual collection was for $860. The purchase of a computer on account for $1,500 was recorded as a debit to Supplies for $1,500 and a credit to Accounts Payable for $1,500. Services were performed on account for a client for $690. Accounts Receivable was debited for $690 and Service Revenue was credited for $69. A payment of $650 for utilities was recorded as a debit to Utilities Expense for $650 and a debit to Cash for $650. earned prior to December 31. A debit posting to Salaries Expense of $950 was omitted. A payment on account for $306 was credited to Cash for $306 and credited to Accounts Payable for $360. 9. 10. At the end of the year, Alpha's Board of Directors declared a dividend of $1,000 to be paid next year But the dividend was recorded as a debit to Salaries Expense and a credit to Cash. Before making any corrections to the account balances, you want to make sure that you have found all of the errors. To do this, find the correct total debits and credits (to see if they equal) using the following format: Debit $15,060 +$3,240 Credit $16,235 $3,240 Incorrect Totals

Answer 1

In Q3 actual collection is $ 860, but it is recorded at $ 680 difference is of $ 180 ( 860 -680). Entry will be posted as Cash A/c Dr. with $ 180 ,Accounts Receivable Cr. with $ 180.

Cash A/c and Accounts Receivables A/c both are asset accounts and have debit balances. Going through the corrections made to trial balance totals, $ 180 is added for debit to Cash A/c and $ 180 is deducted for credit to Accounts Receivables A/c. Credit to an asset account will be shown as deduction from debit totals.

Reasons for other corrections made are explained as under:

Q 1) Cash balance is always on debit side so it is added on debit side and deducted from credit side

Q 2) Unearned service revenue is a liability and have credit balance hence it is added on credit side and deducted from debit side

Q 3) already explained above

Q 4) Entry will be posted as debit to Computer a/c and credit to Supplies A/c. Both of these A/cs are asset accounts and have debit balances. $ 1500 is added for debit to Computer A/c and $ 1500 is deducted for credit to Supplies A/c. Credit to an asset account will be shown as deduction from debit totals.

Q 5) Service revenue is credited with less amount hence differential amount of $ 621 will be added to credit totals

Q 6) Cash is debited by $ 650 instead of crediting it. Once $ 650 is to be deducted from debit totals to correct the mistake of debiting cash while making cash payment and another $ 650 is to be deducted from debit totals to give actual effect of cash payment.

Q 7) Entry to be posted as Unearned Revenue A/c Dr. Revenue A/c Cr. Both of these A/cs have credit balances. $ 725 is to be added to credit side for crediting Revenue A/c. $ 725 is to be deducted from credit side for debiting Unearned Revenue A/c. Debit to an liability account will be shown as deduction from credit totals.

Q 8) $ 950 to be added to debit side for recording salary expense

Q 9 ) Accounts Payable is a liability account it has credit balance. This A/c should be debited while making payment. Erroneously it is credited. $ 360 to be deducted from credit totals to correct the mistake of crediting Account Payable while making payment. For recording actual payment made, deduct $ 306 from credit side totals.

Q 10) Entry debiting Salary expense and crediting Cash A/c is to be reversed so for this deduct $ 1000 and add $ 1000 from the debit totals as both of these accounts have debit balances. To make the correct entry, debit Retained Earnings A/c and credit Dividend Payable A/c. For this deduct $ 1000 and add $ 1000 from the credit totals as both of these accounts have credit balance. Correction of this question will not have any effect on the debit and credit totals because amount is correctly used while making entry only wrong accounts are chosen. If nothing is added or deducted from debit and credit totals then also there is no issue. Totals will still match. Correction for this question do not involve change of amount only accounts will get changed.