28 - Correcting Errors • Sometimes the trial balance...

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Flow of Accounting Data Transaction occurs Transaction analyzed Accounts identified Debit/Credit rules applied Transaction recorded in the Journal Amounts posted to the Ledger Determining Account Balance After transactions are posted, the amount in each ledger account is computed The debit side and credit side are totaled The difference between the two sides is computed If the debit side is larger, the account has a debit balance If the credit side is larger, the account has a credit balance Trial Balance Lists all accounts with their balance Debit amounts in the left column Credit amounts in the right column Begins with assets, then liabilities and stockholders’ equity The columns are totaled and should equal each other Shows if debits equal credits
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Unformatted text preview: Correcting Errors • Sometimes the trial balance columns don’t equal • Steps to find the error: Search for any missing accounts Divide the out-of-balance amount by two • This will help find a debit that was listed as a credit, and vice versa Divide the out-of-balance amount by nine • Slide – misstating an amount by omitting or adding a zero ($4000 as $400) • Transposition – switching figures within a number ($1342 as $1423) Chart of Accounts • Each account is assigned a number Assets usually begin with 1 • 100s or 1000s Liabilities usually begin with 2 • 200s and 200s Stockholders’ Equity (Common Stock, Dividends and Retained Earnings) begin with 3 Revenues with a 4 and Expenses with a 5...
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28 - Correcting Errors • Sometimes the trial balance...

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