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What is the effect on the trial balance if a $1,000 cash sale is recorded incorr
What is the effect on the trial balance if a $1,000 cash sale is recorded incorrectly as a $1,000 expense?
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Practice Questions
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Q1
What is the effect on the trial balance if a $1,000 cash sale is recorded incorrectly as a $1,000 expense?
No effect
Increase in assets
Decrease in liabilities
Increase in expenses
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Recording a cash sale as an expense increases expenses and creates an imbalance in the trial balance.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the effect on the trial balance if a $1,000 cash sale is recorded incorrectly as a $1,000 expense?
Solution:
Recording a cash sale as an expense increases expenses and creates an imbalance in the trial balance.
Steps: 5
Show Steps
Step 1: Understand that a cash sale means money is received for goods or services.
Step 2: Know that recording a cash sale should increase revenue, not expenses.
Step 3: Realize that if the cash sale is incorrectly recorded as an expense, it will increase the total expenses by $1,000.
Step 4: Understand that increasing expenses without increasing revenue creates an imbalance in the trial balance.
Step 5: Conclude that the trial balance will show more expenses than it should, leading to errors in financial reporting.
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