Question

Blind River Limited recently hired Neil Young as its bookkeeper. Mr Young is somewhat inexperienced and has made numerous errors recording daily business transactions.

   Indicate the effects of the errors described below on each of the financial statement elements shown in the column headings. Use the following symbols: O for overstated; U for understated; and NE for no effect.

***USA FORMAT***

	Error		Profit	Total Assets	Total Liabilities	Total Equity
	Recorded the issuance of share capital by debiting Dividends and crediting Cash.
	Recorded the payment of an account payable by debiting Cash and crediting Accounts Receivable.
	Recorded the collection of an outstanding account receivable by debiting Service Revenue and crediting Cash.
	Recorded client billings on account by debiting Accounts Payable and crediting Cash.
	Recorded the payment of an outstanding dividend payable by debiting Dividends and crediting Cash.
	Recorded the payment of salaries payable by debiting Salaries Expense and crediting Salaries Payable.
	Recorded the purchase of office supplies on account by debiting Rent Expense and crediting Office Supplies.

Answer 1

Solution:

Error	Profit	Total Assets	Total Liabilities	Total Equity
Recorded the issuance of share capital by debiting Dividends and crediting Cash.	NE	U	NE	U
Recorded the payment of an account payable by debiting Cash and crediting Accounts Receivable.	NE	O	O	NE
Recorded the collection of an outstanding account receivable by debiting Service Revenue and crediting Cash.	U	U	NE	U
Recorded client billings on account by debiting Accounts Payable and crediting Cash.	U	U	U	U
Recorded the payment of an outstanding dividend payable by debiting Dividends and crediting Cash.	NE	NE	O	U
Recorded the payment of salaries payable by debiting Salaries Expense and crediting Salaries Payable.	U	O	O	U
Recorded the purchase of office supplies on account by debiting Rent Expense and crediting Office Supplies.	U	U	U	U