The bookkeeper for Shigeru's Dance Studio did the following in journalizing and posting:

1. A debit posting to Prepaid Insurance of $3,600 was not done.

2. A debit posting of $500 to Accounts Receivable was debited to Accounts Payable.

3. A purchase of supplies on account of $850 was debited to Supplies for $850 and credited to Accounts Payable for $850.

4. A credit to Salaries Payable for $1,200 was posted as a credit to Cash.

5. A credit posting of $250 to Cash was posted twice.

6. A debit side of the entry to record the payment of $1,200 for drawings was posted to Salaries Expense.

7. A credit to Unearned Revenue for $400 was posted as a credit to Service Revenue.

8. A credit to Accounts Payable of $375 was posted as a debit to Accounts Payable.

9. A purchase of equipment on account for $6,800 was posted as an $8,600 debit to Equipment and an $8,600 debit to Cash.

10. The provision of $950 of services on account was not recorded because the customer did not pay cash until the following month.

Instructions

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

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

1. Will the trial balance be in balance?

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

3. For each account identified in (2) as being incorrect, is the account overstated or understated and by how much?

4. Is the debit column total of the trial balance stated correctly? If not, does correcting the errors increase or decrease the total and by how much?

5. Is the credit column total of the trial balance stated correctly? If not, does correcting the errors increase or decrease the total and by how much?

TAKING IT FURTHER Your best friend thinks it is a waste of time to correct all of the above errors. Your friend reasons that as long as the trial balance is balanced, then there is no need to correct an error. Do you agree or disagree with your friend? Explain using at least two of the above errors to make your points.