Question

An accountant has debited an asset account for $700 and credited a liability account for $620. Which of the following would be an incorrect way to complete the recording of the transaction?

A) Credit an asset account for $80
B) Credit another liability account for $80.
C) Credit a stockholders' equity account for $80.
D) Debit a stockholders' equity account for $80

Answer 1

Debit a stockholder equity

Step-by-step explanation:

The error in the entry here is that the either the asset asset is over debited with $80 or the liability account under credited with $80 (700-620)

While the asset account should have debit balances , The liability account and the stockholders equity should have credit balances.

A credit of $80 to the asset account means that the excess has been removed while a credit of $80 to another liability account provides for the shortage in the initial entry.

A credit of $80 to the stockholders account means that the shortage as a result of the error in the initial entries also been addressed.

Therefore the incorrect option is a debit entry of $80 to the stockholders equity account .