Question

At Batavia Company, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries.
A collection on account from a customer for $778 was recorded as a debit to Cash $778 and a credit to Service Revenue $778.

The purchase of store supplies on account for $1,280 was recorded as a debit to Store Supplies $1,820 and a credit to Accounts Payable $1,820.

Answer 1

Answer:

Debit to Service Revenue $778 and credit accounts receivable $778.

Debit accounts payable $540 and Credit Store supplies $540

Explanation:

When sales is made to a customer on credit or account, the entries required are debit accounts receivable, and credit revenue. When the customer makes payment, credit accounts receivable ( with the amount paid) and debit the cash account.

Hence, if a collection on account from a customer for $778 was recorded as a debit to Cash $778 and a credit to Service Revenue $778, to correct this, post Debit to Service Revenue $778 and credit accounts receivable $778.

Also, when store supplies are purchased on account, debit store supplies and credit accounts payable with the cost of the supplies received. when payment is made, debit account payable and credit cash account.

Hence where the purchase of store supplies on account for $1,280 was recorded as a debit to Store Supplies $1,820 and a credit to Accounts Payable $1,820. The entries are right but the amount stated is wrong.

Difference (overstatement in both accounts) = $1,820 - $1,280

=$540

To correct this,

Debit accounts payable $540

Credit Store supplies    $540