A first-year co-op student working for Insidz Corp. recorded the company's transactions for the month. He was a little unsure about the recording process, but he did the best he could. He had a few questions, however, about the following transactions:

1. Insidz received $255 cash from a customer on account. It was recorded as a debit to Cash of $255 and a credit to Accounts Receivable of $552.

2. A service provided for cash was posted as a debit to Cash of $2,000 and a credit to Accounts Receivable of $2,000.

3. A credit of $750 for interest earned was neither recorded nor posted. The debit was recorded and posted correctly.

4. The debit to record $1,000 of dividends paid to shareholders was posted to the Salary Expense account. The credit was posted correctly.

5. Services of $325 were provided to a customer on account. The company debited Accounts Receivable for $325 and credited Service Revenue for $325.

6. A purchase of supplies for $500 on account was recorded as a debit to Supplies and a debit to Accounts Payable.

7. Insidz received advances of $500 from customers for work to be done next month. The student debited Cash for $500 but did not credit anything, as he was not sure what to credit.

8. A cash payment of $495 for salaries was recorded as a debit to Salaries Expense and a credit to Salaries Payable.

9. Insidz purchased $1,500 of equipment on account. This transaction was recorded as a $5,100 debit to Equipment and a $5,100 credit to Accounts Payable.

10. A cash payment of $850 for rent for the month was not recorded.

Instructions

(a) Indicate which of the above transactions are correct, and which are incorrect.

(b) For each error identified in (a), answer the following questions:

1. Will the trial balance be in balance?

2. Which account(s) will be incorrectly stated because of the error?

3. State whether each of the incorrect account(s) you identified in (2) will be overstated or understated and by how much.