I am having trouble grasping this concept.

This is a sample problem that I have been trying to work before doing my real homework assignment, and I can not figure out.

There is another posting with the same problem listed however the solution that was posted does not match the answer in the book so it just further confuses me.


Cash 5850 (debit)
Accounts Receivable 2750 (credit)
Prepaid Insurance 700 (debit)
Equipment 8000 (Debit)
Accounts Payable 4500 (credit)
Property Taxes Payable 560 (debit)
M. Sterling, Capital 11,700 (credit)
Service Revunue 6690 (debit)
Salaries Expense 4200 (debit)
Advertising Expense 1100 (credit)
Property Tax Expense 800 (debit)


1. The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Property Tax Expense were each understated $100.

2. Transposition errors were made in Accounts Receivable and Service Revenue. Based on posting made, the correct balances were $2570 and $6960, respectively.

3. A debit posting to Salaries Expense of $200 was omitted.

4. A $1000 cash drawing by the owner was debited to M. Sterling, Capital for $1000, and credited to cash for $1000.

5. A $520 purchase of supplies on account was debited to Equipment for $520 and credited to Cash for $520.

6. A cash payment $450 for advertising was debited to Advertising Expense for $45 and credited to cash for $45.

7. A collection from a customer for $210 was debited to Cash for $210 and credited to Accounts Payable for $210.

Please explain how to work this correctly. Thanks.

I assume you're referring to this thread:
https://www.askmehelpdesk.com/finance-accounting/correcting-trial-balance-cannot-figure-out-332497.html

You're right that the answers aren't correct. The total of 24,410 that Pready gave in the last post is correct, but I cannot open the Excel file to check the answers.

Post #3 shows most of what to do, except that 4 & 5 are only partially correct. It also gives no explanation of why, which likely isn't going to help you figure out your homework.

Even if this isn't an assigned homework problem, it's always better if you show us your attempts at trying to do it and then let us see how on track you are and give hints from there. IOW, make sure you're doing most of the work yourself. What I will do is give you a sample of how to figure these out. Some of them are tricky so think carefully.

For instance, since prepaid insurance and property tax expense are debit accounts, the debit side being understated by $100 simply means you need to add $100 to each of those.

The payable is a bit trickier because it's a credit account. What does a debit do that account? So if you debited too little (understated), what affect does that have? If that doesn't make sense, draw a t account. Put in some totals for the debit and credit side, making sure the credit side is bigger, and then balance the account. (Doesn't matter what the numbers are.) Then think about that the debit side was understated by $100. If it's understated, you need another debit. So put in another $100 debit. Now re-balance and observe what happens to the balance. What you just observed is how you need to change it.

You can utilize t accounts for any of this if the visual helps.

If something goes into the wrong account, subtract it from that account and add it to the correct account.

If something is in the incorrect dollar amount, you can always figure out the difference. But one easier way is to subtract out the incorrect dollar amount and then add the correct amount.

See how much you can do with this. Some of the correct stuff is in the other post, but you can always ask if you don't understand why something was done. (Remember 4 & 5 are only partially correct.)

I have worked this problem at least six times and still don't totally get it.

This is what I have done:

1. Added 100 to Prepaid Insurance and Property Tax Expense, subtracted 100 from A/P.
2. Fixed Transposition
3. Added 200 to Salary Expense.
4. Added Drawings Account and debited 1000. Subtracted 1000 from Capital.
5. Debited Supplies 520, Subtracted 520 from cash and equipment, and added 520 to A/P.
6. I don't understand this one
7. I am not sure about this one either.

I have attached the completed worksheet in Excel 97-2003 format.
Click on each Cell to see where the numbers came from. For example in cash column B3 I started with the beginning Cash amount, then I had one addition and one subtraction.

#4. You need to add the $1,000 back into the capital account, not subtract it.

#6. The original post was for $45, so you need to add $405 to Advertising expense and subtract an additional $405 from cash to get to the correct amount of $450.

#7. This was a payment that was received from a customer, so you need to Debit the Accounts Payable account to reverse the entry and Credit Accounts receivable for the amount because you are reducing what is owed to you.

OK, pready and I have both screwed this up. Doesn't that just give you lots of confidence?:p These things can be a bit confusing.

What I screwed up was missing the "on account" on #5. And missing that is how I ended up with 24,410 totals.

But those totals are also what pready has, which is not correct. For a different reason. It's amazing that we made two different errors and ended up with the same total! pready, you've taken the 520 out of receivables instead of adding it to payables. In the original post you said it right, but didn't do on the Excel file what you said.

The reason #4 is an addition is because it was debited by mistake. A debit to the capital account is a reduction of that account. So you have to add it back in.

And on #5 you don't want to subtract from cash. You're messing up the "backwards" ones. I think you're just subtracting everything that's a wrong account, and not paying attention to whether it was debited or credited. If it was credited to cash, that's a subtraction. Again, you have to add it back in.

Don't just remove a wrong account by subtracting from it. If the wrong account was a subtraction, then you're adding back in. That's what is messing you up on those.

The totals should be 24,930.

Hello,

I have tried to do the same problem but cannot get the credit side to equal 24,930. The debit side is fine, but I'm not sure about credit side.

Trial Balance
Account Name Dr Cr
Cash 6,565
Accounts Receivable 2,570
Prepaid Insurance 800
Supplies 520
Equipment 7,480
Accounts Payable 4,610
Property Taxes Payable 560
M Sterling, Capital 12,700
M Sterling, Drawing 1,000
Service Revenue 6,960
Salaries Expense 4,400
Advertising Expense 695
Property Tax Expense 900
Total 24,930 24,830

Can someone please tell me what I did wrong and where the 100 is missing on the credit side? Thank you!

The first thing to do is set up a Trial Balance worksheet with your account balances in the Debit and Credit Columns.

Next there are 4 accounts with their amounts in the wrong column so you need to move them to the correct column. They are Accounts Receivable, Property Taxes Payable, Service Revenue and Advertising Expense.


Now you can work on the numbered problems.
1. Add $100 to Prepaid Insurance and Property Tax Expense. Subtract $100 from Accounts Payable.

2. Make the corrections to the balances of the 2 accounts.

3. Add $200 to Salaries Expense

4. Add $1,000 to the capital account and add $1,000 to the Drawing Account.

5. Subtract $520 from Equipment, add $520 to Cash, add $520 to Supplies and add $520 Accounts Payable.

6. Subtract $45 from Advertising Expense and add $45 to Cash. Add $450 to Advertising Expense and subtract $450 from Cash.

7. Subtract $210 from Accounts Payable and Accounts Receivable.

8. Now total your Debits and Credits and they should equal. Your Debits and Credits should be 24,930

See attached Excel 97-2003 trial balance to see how it should look like.

Excon would say that he "didn't drink the koolaid", but I must have been drinking the koolaid when I was working on this problem before. :)