What is the impact on the trial balance if a $500 payment to a supplier is recor

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Question: What is the impact on the trial balance if a $500 payment to a supplier is recorded as a $500 increase in Accounts Receivable?

Options:

Correct Answer: Liabilities increase

Solution:

This incorrect entry would increase Accounts Receivable instead of decreasing Cash, leading to an imbalance in the trial balance.

What is the impact on the trial balance if a $500 payment to a supplier is recorded as a $500 increase in Accounts Receivable?

What is the impact on the trial balance if a $500 payment to a supplier is recorded as a $500 increase in Accounts Receivable?

Step 1: Understand that a payment to a supplier means you are giving cash to them.
Step 2: Know that when you pay a supplier, you should decrease your Cash account.
Step 3: Realize that recording the payment as an increase in Accounts Receivable is incorrect.
Step 4: Understand that Accounts Receivable should only increase when you are owed money, not when you pay someone.
Step 5: Recognize that this incorrect entry will show more money owed to you than there actually is.
Step 6: Conclude that this will cause the trial balance to be out of balance because the total debits and credits will not match.

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