Accounting Errors—Transaction Errors
How would the following errors affect the account balances and the basic accounting equation,
Assets = Liabilities + Owners’ Equity?

How do the misstatements affect income?

a. The purchase of a truck is recorded as an expense instead of an asset.


b. A cash payment on accounts receivable is received but not recorded.


c. Fictitious sales on account are recorded.


d. A clerk misreads a handwritten invoice for repairs and records it as $1,500 instead of $1,800.


e. Payment is received on December 31 for the next three months’ rent and is recorded as
revenue.