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10. Two students are discussing the use of a trial balance. They wonder whether the following errors, each considered separately, would prevent the trial balancing from balancing. If trial balance did balance, does this mean the transactions were entered correctly. What would you tell them?
a) The book keeper debited Accounts Receivables for $900 dollars and credited Cash for $900 for receipt of monies from sales made on account, previously recorded.
b) Cash collected on account was debited to Cash for $900, and Service Revenue was credited for $90.
Expert Answer
a) The trial balance would balance because bookkeeper debited the Accounts Receivable for $900 correctly and Cash is credited correctly. But this doesn’t mean the transactions were entered correctly. The correct entry for this transaction would be Cash debited for $900 and Accounts Receivables credited for $900.
b) The trial balance will not balance. Cash and Service Revenue is correctly debited and credited respectively in each column but the correct dollar amount is not entered either for Cash or Service Revenue and this will prevent trial balance from balancing.
