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Prepare the correcting entries for the below transactions:
c) Drawings of $5,000 by the owner, Mr. Seow was posted as a debit of $5,000 to Capital and a credit of $5,000 to Cash.
My Ans:
Error:
Dr Capital $5, 000
Cr Cash $5, 000
Dr Cash $5,000
Cr Capital $5,000
???
Dr Drawings $5000
Cr Capital $5, 000d) On 30 Dec 2004, Mr. Seow received $7,000 from a customer for services rendered from June to Dec 2004, each month amounting to $1,000.
Mr Seow posted the full amount as a debit to Cash and a credit Fees Earned accounts on 31 Dec 2004.
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Part (c)
Dr Drawings $5,000
Cr Capital $5,000.
Explanation: Let's take a look at the Drawing part first. When you draw an amount, the entry which you will record is debit Drawings a/c and credit Cash a/c. But instead of debiting to Drawings a/c, Mr.seow mistakenly debited into Capital a/c. So you'll need to Credit the Capital a/c, and debit the Drawings a/c to make it right.
Part (d) Looked correct leh the question.. Unless you want the next step (Transfer to P&L)
Dr Fees Earned $7,000Cr P&L $7,000
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what is the y/e?
d) Services rendered to customer from June to Dec 2004, shouldn't there be a debtors account?
If sales was recorded before with an existing Debtors a/c, then crediting Fees Earned would have resulted in recording the Sales twice.
Mr Seow should have posted:
Cr Debtors $7,000
Dr Cash $7,000
Journal Entry to Correct:
Cr Debtors $7,000
Dr Fees Earned $7,000
Edited by maurizio13 05 May `08, 10:06AM
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Originally posted by maurizio13:
what is the y/e?
d) Services rendered to customer from June to Dec 2004, shouldn't there be a debtors account?
If sales was recorded before with an existing Debtors a/c, then crediting Fees Earned would have resulted in recording the Sales twice.
Mr Seow should have posted:
Cr Debtors $7,000
Dr Cash $7,000
Journal Entry to Correct:
Cr Debtors $7,000
Dr Fees Earned $7,000
Right...
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