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sheenbean8 · Oct 5, 2012, 11:05 AM

1) Which of the following errors would most likely lead to an overstatement of income?

A. Recording revenue next period when the cash is collected although it is earned in the current year.
B. Recording an expense incurred this year when the cash is paid next year.
C. Failure to adjust deferred rent revenue account for the portion of rent earned this year.
D. Failure to record an expense incurred in the current period.

I say A because if you record cash it should be in an Unearned Revenue (liability) account for future usage, not Revenue.

2) The following is an example of an error that will not be discovered on the trial balance:

A. An entry was journalized and posted as a debit to cash for $500 and credit to accounts receivable for $5,000.
B. An entry was journalized and posted as a debit to cash for $500 and a credit to sales revenue $500 when payment was received on a customer's account.
C. An entry was journalized and posted as a debit to wages expense for $20,000 and a debit to wages payable for $20,000.
D. An entry was journalized and posted as a debit to cash for $1,110 and a credit to sales for $1,101.

I say B because they amounts are equal and one is to debit and one is to credit, so they would even out and not be noticed

paraclete · Oct 5, 2012, 04:00 PM

D. It overstates profit, your answer understates income

The second answer is correct