Effects of Errors on Financial Statements
Indicate the Immediate Effect

question 43

Essay

Effects of errors on financial statements
Indicate the immediate effect of the following errors on each of the accounting elements described in the column headings below, using the following code: O = Overstated; U = Understated; NE = No Effect.
$\begin{array}{lccccc}&\text { Total}&\text { Total }&\text { Profit }&\text { Total }&\text { Total }&\text { Equity }\\\text { Error } & \text { Revenue } & \text { Expense } & & \text { Assets } & \text { Liabilities } \\\text { Example: Received } \$ 500 \text { cash for } & \mathrm{U} & \mathrm{NE} & \mathrm{U} & \mathrm{U} & \mathrm{NE}& \mathrm{U}\\\text {services rendered to a customer, but}\\ \text {recorded the transaction as \( \$ 50 \)}\\\text { (a.) Recorded twice a sale of services }\\\text { to a customer.}\\\text { (b.) Recorded the purchase of office }\\\text {equipment on account as a debit to }\\\text {Office Equipment and a credit to }\\\text {Accounts Receivable}\\\text { (c.) Failed to record intereset accrued }\\\text { on investments during the period.}\\\text { (d.) Recorded collection of account}\\\text { at end of period on note payable.}\\\text { receivable by debit to Cash and credit }\\\text { to Revenue}\end{array}$

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