When processing the accounts for Ellise’s Electrical Contractors, the following

Question

When processing the accounts for Ellise’s Electrical Contractors, the following errors were made.

1. Electrical equipment purchased for $7800 cash was debited to Equipment and credited to Accounts Payable for an incorrect amount of $8700.

2. Collection of an account receivable for $4500 was recorded by a debit to Cash at Bank and a debit to the equity account of the owner.

3. A cheque for $6000 issued to pay for an account payable was recorded as a debit to Accounts Payable and a credit to Accounts Receivable for $6000.

4. A $2100 payment for assorted electrical tools was recorded as a debit to Equipment and a credit to Cash at Bank for $210.

5. Cash of $2000 withdrawn by the owner from the business was debited to Salaries Expense and credited to Cash at Bank.

Required

(a) Identify which of the above errors would cause unequal totals in a trial balance prepared at the end of the period.

(b) Write a brief explanation for each error to indicate how it could be fixed in the accounting records.

Explanation / Answer

Answer

A.

(a) The trial balance will still balance in spite of this error as there is an equal debit and credit for $8700, even though the credit to the Accounts Payable account was incorrect. The correct entry should have been to debit Office Equipment and credit Cash at Bank for the amount of $8700.

(b)There should have been a credit to Accounts Receivable instead of a debit to the Capital account. This will cause an unequal total in the trial balance because two debit entries wererecorded in error, and no credit.

(c)The trial balance will still balance in spite of this error as there is an equal debit and credit for $6000, even though the wrong account was credited.

(d)The trial balance will still balance in spite of this error, as the debit and credit were both equal to $210.

(e)The trial balance will still balance in spite of this error as there is an equal debit and credit for $2000, even though the wrong account was debited.

B.

(a)    To fix this error, the following journal entry is needed:

Accounts Payable    DR            8700

Electrical Equipment CR                 900

Cash at Bank           CR         7800

(Correcting errors made in certain asset and liability accounts)

(b)

In order to fix this error, the error in the Capital account will need to be eliminated by crossing out the amount of $4500 from the account; and the debit in the Accounts Receivable account for $4500 will need to be crossed out and then the amount will need to be credited to the account.

account receivable DR $4500

Capital account CR                        $4500

(c)

Accounts Receivable DR $6000

Bank CR                                     $6000

(d)

assorted electrical tools DR    $210

Equipment CR                                $210

(e)

First for withdwawn

Cash DR   $2000

Capital CR            $2000

Secound for incorrect entry

Cash at bank Dr $2000

Salaries Expense CR $2000

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