Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected. Transactions Total Revenue Total Expenses Net Income Example: A check for $325 was written to pay on account. The accountant debited Rent Expense for $325 and credited Not Affected Overstated Understated Cash for $325. a. $615 was received on account from customers. The accountant debited Cash for $615 and credited Professional Fees for $615. b. The owner withdrew $1,500 for personal use. The accountant debited Salary Expense for $1,500 and credited Cash for $1,500. c. A check was written for $1,265 to pay the rent. The accountant debited Rent Expense for $1,625 and credited Cash for $1,625. d. $2,100 was received on account from customers. The accountant debited Cash for $2,100 and credited the Capital account for $2,100. e. A check was written for $525 to pay the phone bill received and recorded earlier in the month. The accountant debited Phone Expense for $525 and credited Cash for $525.
Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected. Transactions Total Revenue Total Expenses Net Income Example: A check for $325 was written to pay on account. The accountant debited Rent Expense for $325 and credited Not Affected Overstated Understated Cash for $325. a. $615 was received on account from customers. The accountant debited Cash for $615 and credited Professional Fees for $615. b. The owner withdrew $1,500 for personal use. The accountant debited Salary Expense for $1,500 and credited Cash for $1,500. c. A check was written for $1,265 to pay the rent. The accountant debited Rent Expense for $1,625 and credited Cash for $1,625. d. $2,100 was received on account from customers. The accountant debited Cash for $2,100 and credited the Capital account for $2,100. e. A check was written for $525 to pay the phone bill received and recorded earlier in the month. The accountant debited Phone Expense for $525 and credited Cash for $525.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not Affected.
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Transcribed Image Text:Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by selecting Overstated (too much), Understated (too little),or Not
Affected.
Transactions
Total Revenue
Total Expenses
Net Income
Example: A check for $325 was written to pay on account.
The accountant debited Rent Expense for $325 and credited
Not Affected
Overstated
Understated
Cash for $325.
a. $615 was received on account from customers. The
accountant debited Cash for $615 and credited Professional
Fees for $615.
b. The owner withdrew $1,500 for personal use. The
accountant debited Salary Expense for $1,500 and credited
Cash for $1,500.
c. A check was written for $1,265 to pay the rent. The
accountant debited Rent Expense for $1,625 and credited
Cash for $1,625.
d. $2,100 was received on account from customers. The
accountant debited Cash for $2,100 and credited the
Capital account for $2,100.
e. A check was written for $525 to pay the phone bill
received and recorded earlier in the month. The accountant
debited Phone Expense for $525 and credited Cash for
$525.
Expert Solution
Step 1
Meaning of Rectification of Errors
The procedure of revising mistakes is known as “Rectification of Errors”. These errors can be of two types. First, the errors committed on both side in an entry which does not influence the trial balance and can be rectified by making a journal entry.
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