Assume when you reviewing your trial balance you find 2 errors. A) the checking
ID: 2378255 • Letter: A
Question
Assume when you reviewing your trial balance you find 2 errors.
A) the checking account balance was understated by $304.30.
B) The accounts receivable account balance is overstated by $32.33.
What do you think are the most likely causes of the 2 errors? Be specific regarding which transaction might be in error.
How would you correct each of the errors? Specifically, what actions would you take so that your trial balance would show the correct balances.
Explanation / Answer
One of the major reasons for recording transactions in accounts is to provide the informa- tion needed for financial reports. However, before the information can be used to prepare these reports, it is necessary to check the accuracy of the entries that were recorded. Remember that every entry consists of a debit and a credit. Therefore, the total of all the debits recorded in the accounts should equal the total of all the credits. This equality is verified by taking a trial balance.
These errors can be because of :
for A : A) the checking account balance was understated by $304.30.
1 . Omission of posting of credit e.g. A credit entry of $304.30. check not posted at all
2 . Wrong carry forward of balance in the various books, i.e. day books, cash book, etc.
for B they can be : B) The accounts receivable account balance is overstated by $32.33.
1 . Errors in the total or posting or entries of subsidiary book.
Error correction :
Since generally trial balance are written in pencil ,If an error is located, erase it and write the correct amount in pencil. Errors in entries that have been written in ink are part of the permanent financial records. Therefore, they may never be erased or covered over with correction fluid or tape. Erasing or covering up errors will make the records suspect because it appears that some-one may be falsifying the records.
The type of correction required depends upon the type of error that was made.
For A ;
for A we add an extra entry saying amounts payble to you and add #304.30 to credit account which adjusts the checking account balance or we could just erase it and write correctly. and if its written in ink we strike it off and write new entry correctly
For B :
Here also we could do the same as above . strike off with pen and write new entry or erase and enter new entry with pen OR add a new entry saying accounts receivable extra to $32.33
OR FOR both A & B together :
we could add a entry saying MIssing credits and add up $304.30 + $32.33 = $ 336.63 and make trial balance .