Stephen Corporation recently hired Tom Waters as its new bookkeeper. Waters is very inexperienced and has made seven recording errors during the last accounting period. The nature of each error is described in the following table.
Instructions
Indicate the effect of the following errors on each of the financial statement elements described in the column headings in the table. Use the following symbols: O = overstated, U = understated, and NE = no effect
Error | Total Revenue | Total Expenses | Net Income | Total Assets | Total Liabilities | Owners’ Equity |
a. Recorded a declared but unpaid dividend by debiting dividends and crediting cash. |
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b. Recorded a receipt of an account receivable as a debit to cash and a credit to fees earned. |
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c. Recorded depreciation expense twice. |
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d. Recorded the sale of capital stock as a debit to cash and a credit to revenue. |
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e. Purchased equipment and debited supplies expense and credited cash. |
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f. Failed to record expired portion of prepaid advertising. |
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g. Failed to record accrued and unpaid interest expense. |
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