Question

Entries to Correct Errors The following errors took place in journalizing and posting transactions: Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance. A withdrawal of $10,000 by Brian Phillips, owner of the business, was recorded as a debit to Wages Expense and a credit to Cash. Journalize the entries to correct the errors. For part a, first reverse the original entry and then make the correct entry. a. b.

Answer 1

Part A

Date	account and explanation	debit	credit
	Prepaid insurance	18000
	Insurance expense		18000
	(To record reversing entry)
	Cash	10000
	Wages expense		10000
	(To record reversing entry)

Part B

Date	account and explanation	debit	credit
	Insurance expense	18000
	Cash		18000
	(To record insurance expense)
	Owner's drawing	10000
	Cash		10000
	(To record drawings)