Question

Green Company has employed a bookkeeper who is inexperienced. On December 30, after reviewing the records for the year, you discover the following error.

On May 1, Green Company purchased Supplies on account, $280. The bookkeeper recorded this by debiting Supplies Expense for $820 and crediting Cash for $820.

Note: Assume that it is the company's policy to record the purchase of supplies in the Supplies account.

Required:
Prepare a correcting entry on December 30. Make sure to enter the day for each separate transaction.

Answer 1

Date	Particulars	Debit ($)	Credit ($)
30-Dec	Supplies A/c Dr	280
	To Accounts Payable A/c		280
	(Being correct entry passed against May 1, Wrong Entry)
30-Dec	Cash Dr	820
	To Supplies Expense A/c		820
	(Being Rectifying Entry to nullify the error of entry made on May 1)

There are 4 Accounts that needs to be corrected

Cash Account is credited inexcess by $ 820 which is corrected by debiting it by $ 820.

Supplies Expense is not suppose to be debited hence it will be credited by $ 820 to make the balance of supplies Expense equal to Zero.

Supples Account is required to be debited by $ 280.

Accounts Payable Account is required to be credited by $ 280. Supplies are purchased on account that is why Accounts Payable is credited instead of cash.

First entry i s passed which was supposed to be made on May 1.

And Second Entry is passed to rectify the error made by the Book keeper.