Accounting: correcting entries for posting errors
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1.Speedy Bike Company received a $940 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $490 and a credit to Service Revenue $490. The correcting entry is
a. debit Cash, $940; credit Accounts Receivable, $940.
b. debit Cash, $450 and Accounts Receivable, $490; credit Service Revenue, $940.
c. debit Cash, $450 and Service Revenue, $490; credit Accounts Receivable, $940.
d. debit Accounts Receivable, $940; credit Cash, $450 and Service Revenue, $490.
2. A lawyer collected $830 of legal fees in advance. He erroneously debited Cash for $380 and credited Accounts Receivable for $380. The correcting entry is
a. Cash 380
Accounts Receivable 450
Unearned Revenue 830
b. Cash 830
Service Revenue 830
c. Cash 450
Accounts Receivable 380
Unearned Revenue 830
d. Cash 450
Accounts Receivable 450
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Solution Summary
The solution gives a good explanation of the errors made and the subsequent corrections needed for Speedy Bike Company, and legal fees collected in advance. Additional notes are provided about error correction techniques.
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1. The question presumes that the transaction was already recorded in accounts receivable at the time of sale. The entry would have been:
Debit accounts receivable $940
Credit revenue $940
Option a. would have been the correct original entry, but a correcting entry fixes the one that was made. ...
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