what
what is the correcting entry for... cash revenue amounting to $20,000
In rectification of errors we have to pass rectifying entry to nullify the wrong effect and to give the right effect of the transaction
For e g let us take the above transaction of cash revenue amounting to $ 20000
Now suppose a new accountant passed wrong entry---
Revenue A/c-Dr 20000
To Cash 20000
What is wrong here? --- We received cash. Cash is an asset. Rule for assets is debit what comes in credit what goes out.
Here cash came in so we should debit Cash A/c
Another aspect of this tranction is we earned cash because of revenue. So as per rule "credit all revenues & gains and debit all expenses & losses , wehave to credit Revenue A/c
So to rectify the above we have simple four column format as under--
In the format first wewill write wrong entry. Then in second column wewill write reverse of wrong entry ,then wewillwrite correct entry in column 3. Now we have to compare column 2 & 3. In 2 & 3 clumn there is cash-Dr20000 in 2 & 3 respectively . So in the 4 column we will take Cash A/c-Dr 40000. If in column 2 cashwas debit 20000 and in column 3cashwas credit 20000 then casha/c wouldhavebeen eliminated.Similarly for Revenue A/c wewill add col 2 & 3andin col 4 we will take Revenue A/c credit 40000.
Please refer step 2
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