Merriweather Post Pavillion received a $820 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $280 and a credit to Service Revenue $280. The correcting entry is
A) debit Cash, $820; credit Accounts Receivable, $820.
B) debit Cash, $540 and Accounts Receivable, $280; credit Service Revenue, $820.
C) debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820.
D) debit Accounts Receivable, $820; credit Cash, $540 and Service Revenue, $280.

Question

Quizplus · Accepted Answer

The correcting entry should reverse the initial erroneous entry and record the correct transaction. The correct transaction is a debit to Cash for $820 and a credit to Accounts Receivable for $820. The correcting entry should correct the debit side by increasing it by $540 (820 - 280), and correct the credit side by decreasing it by $280. Therefore, the correcting entry should be a debit to Cash for $540 and a debit to Service Revenue for $280, and a credit to Accounts Receivable for $820, which is represented in choice C.

Merriweather Post Pavillion Received a $820 Check from a Customer