During the month of august, jackson products recognizes $15,000 in revenues. jackson's accounting staff records these revenues by entering a $15,000 debit in the firm's revenues account and a $15,000 credit in the accounts receivable account. what, if any, effect will this entry have on jackson's financial statements?

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Business

Woods

3 January, 04:42

During the month of august, jackson products recognizes $15,000 in revenues. jackson's accounting staff records these revenues by entering a $15,000 debit in the firm's revenues account and a $15,000 credit in the accounts receivable account. what, if any, effect will this entry have on jackson's financial statements?

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Osvaldo Weeks · Answer 1

The accounting staff has flipped the debits and credits for this entry. It should have credited (increased) revenue and debited (increased) accounts receivable. This mistake will leave revenue understated by 30,000 and accounts receivable understated by 30,000.

This is because, not only did the accountants not increase these accounts by 15,000 like they should have, but they decreased them by 15,000, making them both understated by 30,000. Quite a mistake!