Tom Duran, CPA, Was Asked by Mike Gore to Review

question 50

Essay

Tom Duran, CPA, was asked by Mike Gore to review the accounting records and prepare the financial statements for his upholstering shop. Tom reviewed the records and found three errors.
1. Cash paid on accounts payable for $930 was recorded as a debit to Accounts Payable $390 and a credit to Cash $390.
2. The purchase of supplies on account for $500 was debited to Equipment $500 and credited to Accounts Payable $500.
3. Mike withdrew $1,200 of cash and the bookkeeper debited Accounts Receivable for $120 and credited Cash $120.
Instructions
Prepare an analysis of each error showing the
(a) incorrect entry.
(b) correct entry.
(c) correcting entry.

---

Definitions:

Fourteenth Amendment

An amendment to the U.S. Constitution, ratified in 1868, that grants citizenship to all persons born or naturalized in the United States, including former slaves, and provides all citizens with equal protection under the laws.

U.S. Constitution

The supreme law of the United States, establishing the framework of the national government and the rights of the citizens.

Bill Of Rights

First ten amendments to the U.S. Constitution, adopted in 1791 to guarantee individual rights against infringement by the federal government.

Black Codes

Laws passed from 1865 to 1866 in southern states to restrict the rights of former slaves; to nullify the codes, Congress passed the Civil Rights Act of 1866 and the Fourteenth Amendment.