Question

A payment on account of 820 to a creditor was debited to accounts payable 280 and credited to cash 280. What is the correct journal entry for this transaction?

1) Debit Accounts Payable 280, Credit Cash 280
2) Debit Cash 280, Credit Accounts Payable 280
3) Debit Accounts Payable 820, Credit Cash 820
4) Debit Cash 820, Credit Accounts Payable 820

Answer 1

The original entry was incorrect, and the proper course of action is to reverse it with a debit to Cash and a credit to Accounts Payable for $280, then make the correct journal entry of debiting Accounts Payable $820 and crediting Cash $820.

Step-by-step explanation:

The correct journal entry for recording a payment of $820 to a creditor when the initial erroneous entry was a debit to accounts payable for $280 and a credit to cash for $280 is to reverse the incorrect entry and then record the correct amount. This involves two steps:

1. Reverse the incorrect entry: Debit Cash $280, Credit Accounts Payable $280.
2. Record the correct payment: Debit Accounts Payable $820, Credit Cash $820.

This sequence of entries rectifies the initial mistake and properly reflects the payment transaction in the accounting records.