Please help! Can someone please give me a clear explanation?? I know what the an
ID: 2551744 • Letter: P
Question
Please help! Can someone please give me a clear explanation?? I know what the answers are for this assignment so don’t send me the answers, I just want an EXPLANATION why the answer is so.Explain to me why Q3 is +180 and -180 on the debit side, and why Q4 is the same, +1500 and -1500 on the debit side. These are the only two I’m stuck on. I attached the handout along with solutions in case reference is needed. You can see I have the answer, I want to know why that’s the answer for those two questions.
For Q3 I know that Cash is debited as the payment made by the customer and Accounts Receivable is credited to show the customer no longer owes anything.
Handout 1 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. The actual collection was for $860. 4. The purchase of a computer on account for $1,500 was recorded as a debit to Supplies for $1,500 and 5. 6. 7. 8. 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. When the Unearned Service Revenue account was reviewed, it was found that $725 of the balance was 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
Explanation / Answer
It's very clear.You already know the answer and the reason.just analyse:
When you received cash from customer you must have debited cash and credited account receivable by the amount less recorded earlier I.e. 180.
Both cash and account receivable are assets.
Hence cash being asset is increased by $180 and account receivable being decreased by the same amount is shown in negative of debit side.You must note that it is not a liability to show on credit side.
Same for question 4,
Wrong entry made is-
Supplies A/C .......Dr. 1500
To Account Payable. 1500
Right entry should be-
Computer A/C...........Dr. 1500
To Account Payable. 1500
Now,you will notice that on rectification entry will we..
Computer A/C.......Dr. 1500
To Supplies. 1500
Computer is an asset so it will come on debit side.
Supplies is an expense which is also a debit item.Recall the golden rule of accountancy.
Debit all expenses and credit all gains.
So,when this is a debit expense,it must be shown as a reduction from supplies account and not as a liability.
I am sure now you would never have any confusion about this concept dear student.
One more thing,you must notice that account Payable is credited earlier and only the debit entry is wrong so it will remain unaffected.