In 2019, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2018. In 2019, which of the following accounts will have to be credited to correct this error?
A) Salaries and Wages Payable.
B) Salaries and Wages Expense.
C) Retained Earnings.
D) Income Summary.

Question

Quizplus · Accepted Answer

To correct an overstatement of expenses from a prior period, the correction is made through Retained Earnings. This is because the error affects the net income of a previous year, which has already been closed to Retained Earnings.

In 2019, Milford Corporation Determined That It Overstated Salaries Payable