Joe Company purchased supplies inventory for $5,000. Due to an error in posting, the inventory account was debited for only $500 when trade payables were credited for $5,000. During which phase of the accounting information cycle, would this error be discovered?

Question

Quizplus · Accepted Answer

The error would be discovered during the preparation of the trial balance, as this process involves checking the accuracy of the debit and credit entries in the general ledger. In this case, the trial balance would not reconcile as the supplies inventory account balance is understated by $4,500. Once the error is discovered during the trial balance phase, it can be corrected through a journal entry and the financial statements can be prepared accurately.

Joe Company Purchased Supplies Inventory for $5,000