Question

Exercise 2-20 Identifying effects of posting errors on the trial balance LO A1, P2

Posting errors are identified in the following table. In column (1), enter the amount of the difference between the two trial balance columns (debit and credit) due to the error. In column (2), identify the trial balance column (debit or credit) with the larger amount if they are not equal. In column (3), identify the account(s) affected by the error. In column (4), indicate the amount by which the account(s) in column (3) is under- or overstated. Item (a) is completed as an example. (Select "None" if there is no effect.)
  

  

Description of Posting Error Difference between Debit and Credit Columns Column with the Larger Total Identify Account(s) Incorrectly Stated Amount That Account(s) Over-or Understated 180 Credit Rent Expense Rent Expense is understated by $180 $2,970 debit to Rent Expense is posted as a $2,790 debit. $5,940 credit to Cash is posted twice as two credits to Cash. $11,880 debit to the Dividends account is debited to Common Stock. $2,820 debit to Prepaid Insurance is posted as a debit to Insurance Expense. $51,975 debit to Machinery is posted as a debit to Accounts Payable. $6,840 credit to Services Revenue is posted as a $684 credit. $2,010 debit to Store Supplies is not posted.

Answer 1

	Description of Posting Error	Difference between Debit and Credit Columns	Column with the Larger Total	Identify Account(s) Incorrectly Stated	Account That Account(s) Over-or Understated
a.	$2970 debit to Rent Expense is posted as a $2790 debit	$180	Credit	Rent Expense	Rent Expense is understated by $180
b.	$5940 credit to Cash is posted twice as two Credits to cash	$5940	Credit	Cash	Cash is understated by $5940
c.	$11880 debit to the dividends account is debited to common stock	$0	NA	Dividend (&) Common Stock	Dividend (&) Common stock both are understated by $11880
d.	$2820 debit to prepaid insurance is posted as debit to insurance Expense	$0	NA	Prepaid Insurance (&) Insurance Expense	Prepaid Insurance is understated by $2820 (&) Insurance Expense is Overstated by $2820
e.	$51975 debit to Machinery is posted as a debit to Accounts Payable	$0	NA	Machinery (&) Accounts Payable	Machinery (&) Accounts Payable both are understated by $51975
f.	$6840 credit to Services Revenue is posted as a $684 credit	$6156	Debit	Service Revenue	Service Revenue is understated by $6156
g.	$2010 debit to store supplies is not posted	$2010	Credit	Store Supplies	Store Supplies is understated by $2010