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When it comes to putting transactions into the right account with the right type of entry,...

When it comes to putting transactions into the right account with the right type of entry, what can go wrong if we mess up and debit the wrong account and/or credit the wrong account? What are some of the trickle effects that could arise from that?

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Answer #1

If we debit or credit to the wrong account then the financial statements will not be able to reflect the true and fair view. Assets, liabilities and equity's amount will be incorrect. They might be artificially up and down.

Following are the trickle effect that could arise:-

1. Irrelevant account will be credited.

2. Irrelevant account will be debited.

3. Financial statements will not represent true and fair view.

4.. Auditor might issue a disclaimer of opinion.

5. Sarbanes Oxley act provisions may not be met.

6. Intervention of regulatory bodies.

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