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12 June, 08:39

A company received $1,000 from a cash sale to a customer. However, when the transaction was journalized, the accountant accidentally debited Cash and credited Service Revenue for $100 each. Assuming there were no other errors, which of the following statements is/are true? (check all that apply) Select one or more:

a. Total debits and total credits on the trial balance will not be equal.

b. Total debits and total credits on the trial balance will still be equal.

c. The account balances for cash and service revenue will still be correct.

d. The balance sheet equation will be in balance.

e. The balance sheet equation will not be in balance.

f. The account balances for cash and service revenue will be incorrect

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  1. 12 June, 11:24
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    b. Total debits and total credits on the trial balance will still be equal.

    d. The balance sheet equation will be in balance.

    f. The account balances for cash and service revenue will be incorrect.

    Explanation:

    In accounting, this kind of mistake is called subsidiary entries under Types of Errors in Accounting. Therefore, all the transactions that recorded incorrectly are regarded as subsidiary entry.

    Although, as regards this particular question, the account balances for cash and service revenue will not be correct, but this does not prevent the total debits and total credits on the trial balance from being equal nor prevent the balance sheet equation to balance.

    The implication is that this error will not show in the trial balance. The solution to this error in order to detect this kind of error is to carry out a bank reconciliation frequently by comparing figures on the bank statement to the figures in the company's books.
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