Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 2-6

Purpose:

(L.O. 7) This exercise will test your ability to identify the effects of errors that commonly occur in the process of recording and posting transactions. As you will see, some errors cause the accounts to be out of balance, thus quickly identifying the existence of an error. However, some errors do not cause an imbalance in the accounts and are more difficult to discover.

An inexperienced bookkeeper for Nip-N-Tuck Alteration Shop made the following errors in journalizing and posting the transactions that occurred during February 2014.

1. The credit portion of a journal entry to record a $500 loan payment was posted to the ledger twice.
2. A fictitious transaction was recorded in the journal for the amount of $300.
3. A cash payment of $700 for rent was recorded in the journal by a debit of $700 to Rent Expense and a credit of $70 to Cash.
4. A debit entry of $50 to the Accounts Receivable account was incorrectly recorded as a debit entry of $50 to the Cash account.
5. A cash sale of $890 was incorrectly recorded in the journal as a cash sale of $980.
6. The debit portion of a journal entry to record a $60 credit sale was posted to the ledger, but the credit portion of this entry was not posted.
7. A $150 credit entry in the journal to the Accounts Payable account was posted as a credit to the Accounts Receivable account in the ledger.
8. An entire entry in the journal to record the $75 payment to the City of Orlando for an annual business license fee was omitted in the posting ...