The receipt of money from a bank loan is recorded as a debit to Cash and a credit to Sales. **Handout 4****Alpha, Inc.** made errors and/or omissions during the current year as described below. Indicate the effect of these errors and omissions on total assets, total liabilities, and net income for the year using the following code:- **O** = overstated- **U** = understated- **N** = no effectAlpha uses a periodic inventory system and a year ending December 31. Ignore income taxes.| Error or Omission | Total Assets | Total Liabilities | Net Income ||:------------------------------------------------------------------------------------------------------------------------------------------------------------------------|:------------:|:-----------------:|:----------:|| **Example:** Failed to record a cash sale. | U | N | U || 1. The purchase of equipment for cash is recorded as a debit to Equipment and a credit to Accounts Payable. | | | || 2. Failed to record the purchase of merchandise (inventory) on account. | | | || 3. Cash received from a customer in payment of its existing account is recorded as if the receipt were for a current period sale. | | | || 4. Recorded a credit sale as a debit to Cash and credit to Sales. | | | || 5. The receipt of money from a bank loan is recorded as a debit to Cash and a credit to Sales. | | | || 6. Failed to record depreciation at the end of the current period. | | | || 7. Failed to record AJE: Salaries are paid every Friday for a 5-day workweek. The normal weekly payroll is $40,000. The year end falls on a Tuesday this year. | | | | This handout is designed for use in accounting education to help students understand the impact of various errors and omissions on financial statements. Students are expected to identify whether each scenario results in an overstatement, understatement, or no effect on the financial components listed.

Solution Notation to be used 0 =overstated U = understated N =no effect…

Alpha, Inc., made errors and/or omissions during the current year as described below. Indicate the effect of these errors and omissions on total assets, total liabilities, and net income for the year using the following code: O = overstated, U = understated, N = no effect. Alpha uses a periodic inventory system and a year ending December 31. Ignore income taxes. Error or Omission Total Net Income Total Assets Liabilities Example: Failed to record a cash sale. U N U 1 The purchase of equipment for cash is recorded as a

Alpha, Inc., made errors and/or omissions during the current year as described below. Indicate the effect of these errors and omissions on total assets, total liabilities, and net income for the year using the following code: O = overstated, U = understated, N = no effect. Alpha uses a periodic inventory system and a year ending December 31. Ignore income taxes. Error or Omission Total Net Income Total Assets Liabilities Example: Failed to record a cash sale. U N U 1 The purchase of equipment for cash is recorded as a

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Bookkeeping

Bookkeeping is the process of recording the financial transactions of a company on a regular basis. With the process of bookkeeping, companies can track important financial information that helps management in making crucial decisions.

Question

The receipt of money from a bank loan is recorded as a debit to Cash and a credit to Sales.

**Handout 4**

**Alpha, Inc.** made errors and/or omissions during the current year as described below. Indicate the effect of these errors and omissions on total assets, total liabilities, and net income for the year using the following code:
- **O** = overstated
- **U** = understated
- **N** = no effect

Alpha uses a periodic inventory system and a year ending December 31. Ignore income taxes.

| Error or Omission | Total Assets | Total Liabilities | Net Income |
|:------------------------------------------------------------------------------------------------------------------------------------------------------------------------|:------------:|:-----------------:|:----------:|
| **Example:** Failed to record a cash sale. | U | N | U |
| 1. The purchase of equipment for cash is recorded as a debit to Equipment and a credit to Accounts Payable. | | | |
| 2. Failed to record the purchase of merchandise (inventory) on account. | | | |
| 3. Cash received from a customer in payment of its existing account is recorded as if the receipt were for a current period sale. | | | |
| 4. Recorded a credit sale as a debit to Cash and credit to Sales. | | | |
| 5. The receipt of money from a bank loan is recorded as a debit to Cash and a credit to Sales. | | | |
| 6. Failed to record depreciation at the end of the current period. | | | |
| 7. Failed to record AJE: Salaries are paid every Friday for a 5-day workweek. The normal weekly payroll is $40,000. The year end falls on a Tuesday this year. | | | |

This handout is designed for use in accounting education to help students understand the impact of various errors and omissions on financial statements. Students are expected to identify whether each scenario results in an overstatement, understatement, or no effect on the financial components listed.

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