Avtar Sandhu

[logistic_guy]

The trial balance of \(\displaystyle \text{Avtar Sandhu Co}\). shown below does not balance.

Each of the listed accounts has a normal balance per the general ledger. An examination of the ledger and journal reveals the following errors.

\(\displaystyle \bold{1}\) Cash received from a customer in payment of its account was debited for \(\displaystyle \$ 580\), and Accounts Receivable was credited for the same amount. The actual collection was for \(\displaystyle \$ 850\).
\(\displaystyle \bold{2}\) The purchase of a computer on account for \(\displaystyle \$ 710\) was recorded as a debit to Supplies for \(\displaystyle \$ 710\) and a credit to Accounts Payable for \(\displaystyle \$ 710\).
\(\displaystyle \bold{3}\) Services were performed on account for a client for \(\displaystyle \$ 980\). Accounts Receivable was debited for \(\displaystyle \$ 980\), and Service Revenue was credited for \(\displaystyle \$ 98\).
\(\displaystyle \bold{4}\) A debit posting to Salaries and Wages Expense of \(\displaystyle \$ 700\) was omitted.
\(\displaystyle \bold{5}\) A payment of a balance due for \(\displaystyle \$ 306\) was credited to Cash for \(\displaystyle \$ 306\) and credited to Accounts Payable for \(\displaystyle \$ 360\).
\(\displaystyle \bold{6}\) The withdrawal of \(\displaystyle \$ 600\) cash for \(\displaystyle \text{Sandhu}\)’s personal use was debited to Salaries and Wages Expense for \(\displaystyle \$600\) and credited to Cash for \(\displaystyle \$ 600\).

Instructions
Prepare a correct trial balance. (Hint: It helps to prepare the correct journal entry for the transaction described and compare it to the mistake made.)

 

[logistic_guy]

\(\displaystyle \bold{1}\) Cash received from a customer in payment of its account was debited for \(\displaystyle \$ 580\), and Accounts Receivable was credited for the same amount. The actual collection was for \(\displaystyle \$ 850\).

1​	Account​	Debit​	Credit​
	Cash​	270​	​
	Accounts Receivable​	​	270​

 

[logistic_guy]

\(\displaystyle \bold{2}\) The purchase of a computer on account for \(\displaystyle \$ 710\) was recorded as a debit to Supplies for \(\displaystyle \$ 710\) and a credit to Accounts Payable for \(\displaystyle \$ 710\).

2​	Account​	Debit​	Credit​
	Equipment​	710​	​
	Supplies​	​	710​

 

[logistic_guy]

\(\displaystyle \bold{3}\) Services were performed on account for a client for \(\displaystyle \$ 980\). Accounts Receivable was debited for \(\displaystyle \$ 980\), and Service Revenue was credited for \(\displaystyle \$ 98\).

3​	Account​	Debit​	Credit​
	Accounts Receivable​	980​	​
	Service Revenue​	​	980​

\(\displaystyle \$ 882\) should be added to the service revenue account!

 

[logistic_guy]

\(\displaystyle \bold{4}\) A debit posting to Salaries and Wages Expense of \(\displaystyle \$ 700\) was omitted.

4​	Account​	Debit​	Credit​
	Salaries and Wages Expense​	700​	​
	Cash​	​	700​

\(\displaystyle \$ 700\) should be added to the Salaries and Wages Expense account.

 

[logistic_guy]

\(\displaystyle \bold{5}\) A payment of a balance due for \(\displaystyle \$ 306\) was credited to Cash for \(\displaystyle \$ 306\) and credited to Accounts Payable for \(\displaystyle \$ 360\).

5​	Account​	Debit​	Credit​
	Accounts Payable​	306​	​
	Cash​	​	306​

\(\displaystyle \$ 666\) should be removed from Accounts Payable account.

 

[logistic_guy]

\(\displaystyle \bold{6}\) The withdrawal of \(\displaystyle \$ 600\) cash for \(\displaystyle \text{Sandhu}\)’s personal use was debited to Salaries and Wages Expense for \(\displaystyle \$600\) and credited to Cash for \(\displaystyle \$ 600\).

6​	Account​	Debit​	Credit​
	Owner's Drawings​	600​	​
	Salaries and Wages Expense​	​	600​

 

[logistic_guy]

I have just noticed that in the trial balance of \(\displaystyle \text{Avtar Sandhu Co.}\) the \(\displaystyle \text{Cash}\) balance is written in the Credit column which is very wrong! It should be in the Debit.

 

[logistic_guy]

1​	Account​	Debit​	Credit​
	Cash​	270​	​
	Accounts Receivable​	​	270​

Cash Account Adjustment

\(\displaystyle \text{Cash}: 3,340 + 270 = \$ 3,610\)

 

[logistic_guy]

1​	Account​	Debit​	Credit​
	Cash​	270​	​
	Accounts Receivable​	​	270​

Accounts Receivable Account Adjustment

\(\displaystyle \text{Accounts Receivable}: 2,812 - 270 = \$ 2,542\)

 

[logistic_guy]

2​	Account​	Debit​	Credit​
	Equipment​	710​	​
	Supplies​	​	710​

Supplies Account Adjustment

\(\displaystyle \text{Supplies}: 1,200 - 710 = \$ 490\)

 

[logistic_guy]

2​	Account​	Debit​	Credit​
	Equipment​	710​	​
	Supplies​	​	710​

Equipment Account Adjustment

\(\displaystyle \text{Equipment}: 2,600 + 710 = \$ 3,310\)

 

[logistic_guy]

\(\displaystyle \bold{3}\) Services were performed on account for a client for \(\displaystyle \$ 980\). Accounts Receivable was debited for \(\displaystyle \$ 980\), and Service Revenue was credited for \(\displaystyle \$ 98\).

3​	Account​	Debit​	Credit​
	Accounts Receivable​	980​	​
	Service Revenue​	​	980​

\(\displaystyle \$ 882\) should be added to the service revenue account!

Service Revenue Account Adjustment

\(\displaystyle \text{Service Revenue}: 2,480 + 882 = \$ 3,362\)

 

[logistic_guy]

4​	Account​	Debit​	Credit​
	Salaries and Wages Expense​	700​	​
	Cash​	​	700​

6​	Account​	Debit​	Credit​
	Owner's Drawings​	600​	​
	Salaries and Wages Expense​	​	600​

Salaries and Wages Expense Account Adjustment

\(\displaystyle \text{Salaries and Wages Expense}: 3,200 + 700 - 600 = \$ 3,300\)

 

[logistic_guy]

5​	Account​	Debit​	Credit​
	Accounts Payable​	306​	​
	Cash​	​	306​

Accounts Payable Account Adjustment

\(\displaystyle \text{Accounts Payable}: 3,666 - 666 = \$ 3,000\)

 

[logistic_guy]

Here is \(\displaystyle \textcolor{indigo}{\bold{the \ correct \ Trial}}\) Balance.

Account Title​	Debit​	Credit​
Cash​	3,610​	​
Accounts Receivable​	2,542​	​
Supplies​	490​	​
Equipment​	3,310​	​
Accounts Payable​	​	3,000​
Unearned Service Revenue​	​	1,100​
Owner's Capital​	​	8,000​
Owner's Drawings​	1,400​	​
Service Revenue​	​	3,362​
Salaries and Wages Expense​	3,300​	​
Utilities Expense​	810​	​
\(\displaystyle \textcolor{red}{\bold{Total}}\)​	\(\displaystyle \textcolor{blue}{\bold{15,462}}\)​	\(\displaystyle \textcolor{green}{\bold{15,462}}\)​