Question

correcting entries

A) affect balance sheets accounts only
B)affect income statement accounts only
C) may involve any combination of accounts in need of correction

which one is the correct answer?

Answer 1

Hey there hope this helps,

The answer is option C

Correcting entries usually affect both balance sheet accounts and income statement accounts.

That is correcting entries are those journal entries which are used to correct an transaction that is already recorded.therefore it can include any combination of income stament or balance sheet accounts.

There are 2 methods : 1)reversal of orginal incoorect journal entry,then to record the correct entry.

2)Write a single correcting entry.

heres an example

eg.acconts recevable from customer $4000 ,but the co records the amount as $3000

correct entry cash account should be debited and accounts receivable account to be credited for $4000

wrong entry: cash debit 3000

accounts recevable account credit 3000

correcting entry since there is a difference of $1000 cash is understated and accounts recevable is overstated as it was reduced by 3000 but it shold have ben reduced by 4000

therefore cash account debit 1000

accounts receivable credit 1000

Hope this helps