Topeka Bike Company received a $920 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $290 and a credit to Service Revenue $290. The correcting entry is
A) debit Cash, $920; credit Accounts Receivable, $920.
B) debit Cash, $630 and Accounts Receivable, $290; credit Service Revenue, $920.
C) debit Cash, $630 and Service Revenue, $290; credit Accounts Receivable, $920.
D) debit Accounts Receivable, $920; credit Cash, $630 and Service Revenue, $290.

Question

Quizplus · Accepted Answer

The original entry debited cash for $290, which should have been for $920. This means that an additional debit of $630 is needed to correct the error. The original entry credited Service Revenue for $290, which should not have been credited at all. This means that a credit of $290 needs to be made to the correct account, Accounts Receivable. Therefore, the correcting entry should be: debit Cash, $630 and Service Revenue, $290; credit Accounts Receivable, $920.

Topeka Bike Company Received a $920 Check from a Customer