Question

Will the following errors cause debits or credits to be higher on the unadjusted trial balance? If so, by how much?

a. When preparing the journal entry to record the purchase of land and a building, the accountant debited Land for 12,000 and Cash for25,000 and credited Building for 13,000.
b. The accountant accidentally credited Rent Revenue for1,300 rather than Interest Revenue when showing the cash received for interest on securities.
c. The company's books show a debit of 4,500 to Accounts Receivable and a credit to Sales for450.

Answer 1

Errors in the unadjusted trial balance will result in higher debits or credits by specific amounts.

Step-by-step explanation:

a. Purchase of Land and Building:

Debit to Land: $12,000

Debit to Cash: $25,000

Credit to Building: $13,000

Here, the total debits are $12,000 (Land) + $25,000 (Cash) = $37,000, and the total credits are $13,000 (Building).

The debits are higher by $37,000 - $13,000 = $24,000. Therefore, debits will be higher on the unadjusted trial balance.

b. Incorrect Credit to Rent Revenue:

Incorrect Credit to Rent Revenue: $1,300

This error results in an overstatement of Rent Revenue. Since Rent Revenue is a revenue account with a normal credit balance, this error causes credits to be higher by $1,300 on the unadjusted trial balance.

c. Mismatch in Accounts Receivable and Sales:

Debit to Accounts Receivable: $4,500

Credit to Sales: $450

The total debits are $4,500 (Accounts Receivable) and the total credits are $450 (Sales).

Debits are higher by $4,500 - $450 = $4,050. Therefore, debits will be higher on the unadjusted trial balance.

In summary:

For error (a), debits will be higher by $24,000.

For error (b), credits will be higher by $1,300.

For error (c), debits will be higher by $4,050.