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accounting errors
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Section 3: Preparing a Trial Balance Enduring Understandings: The trial balance is proof that total debits = total credits in the ledger.To error is human. Essential Questions:How do you prepare a trial balance?How do you find and correct errors in the trial balance?
Section 3: Preparing a Trial Balance Objectives: Demonstrate how to prepare a trial balance.Analyze business transactions using prior knowledge of the four steps and the rules to debits and creditsJournalize and post business transactions
Section 3: Preparing a Trial Balance Objectives: Locate and identify journal entries that are incorrect
Use proper accounting principles to correct the wrong journal entries using the three methods
What is the purpose of a Trial Balance? A formal way to prove the ledger. Fifth step in the accounting cycle After all journal entries have been posted to the accounts in the general ledger .
What is the purpose of a Trial Balance?Step 1 ADD ALL Debit BalancesStep 2 ADD ALL Credit BalancesStep 3 COMPARE THE TWO TOTALSDO THEY EQUAL?????
This is called.PROVING THE LEDGER!
Try it yourselves.Problem 7-6Step 1 ADD ALL Debit BalancesStep 2 ADD ALL Credit BalancesStep 3 COMPARE THE TWO TOTALSDO THEY EQUAL?????
Correcting EntriesTo err is human but to really foul things up, you need a computer
What does this quote mean to you?How does it apply to accounting?
Mistakes Will HappenIn accounting, if a mistake is madethere is only 1 single rule that applies.
Making Correcting Entries DependsWhen the error is made
Where the error is made
3 Types of Errors you will SeeAn Error in the journal (the entry has not yet been posted)
Journal Entry is correct, however you made a mistake while posting to the ledger
Error in a journal entry that has already been posted (both journal and ledger are incorrect)
What is wrong with the following example (error type 1)?How would you correct it?
If you discover an error before posting!
Example: On January 1, Mrs. Nemec invested $52,000 to open up a business called: Nemecs Accountants
DateDescriptionPost RefDebit CreditJan1Cash in Bank$25,000 Mrs. Nemec, Capital$25,000
Correcting in the Ledger, if Journal Entry is correct
DateDescriptionPost RefDebitCreditBalanceDebit CreditJan1G1$25,000$25,000
A Correcting Entry is made when..The journal entry has already been posted, however the journal entry is incorrect
Imagine the Following Example:On February 15, Nemecs Accountants paid the monthly rent of $1,500 Rent ExpenseCash in BankDebitCreditDebitCredit$1,500$1,500
However the Journal Entry that was recorded is
DateDescriptionPost RefDebit CreditFeb15Advertising Expense405$1,500 Cash in Bank101$1,500
Acct Name: Advertising Expense
DateDescriptionPost RefDebitCreditBalanceDebit CreditJan1G1$20,000$20,000Feb15G2$1,500$21,500
Acct Name: Rent Expense
DateDescriptionPost RefDebitCreditBalanceDebit CreditJan15G1$2,000$2,000
Make a Correcting Journal Entry First
DateDescriptionPost RefDebit CreditFeb15Rent Expense401$1,500 Advertising Exp.405$1,500
Then Post your Correcting Journal Entries
Acct Name: Advertising Expense
DateDescriptionPost RefDebitCreditBalanceDebit CreditJan1G1$20,000$20,000Feb15G2$1,500$21,500Feb15Correcting EntryG2$1,500$20,000
Acct Name: Rent Expense
DateDescriptionPost RefDebitCreditBalanceDebit CreditJan15G1$2,000$2,000Feb15Correcting EntryG2$1,500$3,500
Try it yourselvesProblem 7.3 in your workbook & textbook
Check answers with me, then move on to Problem 7.4 and 7.9 in your workbook
Problem 7.3 Solution
DateDescriptionPost RefDebit CreditMay10Computer Equipment120$1,500 Cash in Bank101$1,500 Check 809920Office Equipment115$1,500 Computer Equipment120$1,500 Memo 47
Account Name: Computer Equipment
DateDescriptionPost RefDebitCreditBalanceDebit CreditMay1Balance $3,00010G6$1,500$4,50020Correcting EntryG6$1,500$3,000
Account Name: Office Equipment
DateDescriptionPost RefDebitCreditBalanceDebit CreditMay1Balance $70020Correcting EntryG6$1,500$2,200
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