Question

Jawbreaker Company paid $640 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $640 and a credit to Accounts Payable of $640. The correcting entry is A. Accounts Payable 1,280 Cash 1,280 B. Accounts Receivable 460 Cash 460 C. Accounts Receivable 460 Accounts Payable 640 Cash 1,100 D. Accounts Payable 640 Accounts Receivable 640 Cash 1,280

Answer 1

Answer:

A. Accounts Payable 1,280 Cash 1,280

Explanation:

Jawbreaker Company paid $640 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $640 and a credit to Accounts Payable of $640.

The correcting entry is a debit to Accounts Payable of 1,280 and a credit to Cash of 1,280

The correct entry for payment of a creditor on account is to

Dr Account Payable........640

Cr Cash......................................640

However the opposite to the above entry was passed which will give rise to an error double the impact of the transaction value because:

1.The correct transaction to the value of $640 is missing

2. The opposite of the transaction to the value of $640 is existing.

Hence the impact of the error is double the amount which explains the reason why the correction involved twice the value of $640 which is $1,280