Morgan Company used supplies in the amount of $2,000.Due to an error in posting to the general ledger,the supplies account was credited for only $200 while supplies expense was debited for $2,000.During which phase of the accounting cycle would this error be first discovered?
A)Analysis of the supplies purchase transaction.
B)Closing the books.
C)Preparation of the adjusted trial balance.
D)Preparation of the income statement.

Question

Quizplus · Accepted Answer

The error in posting will not be immediately evident during the analysis of the supplies purchase transaction, as it involves an error in posting to the general ledger. Closing the books involves closing temporary accounts like revenue and expenses, and the error would not be discovered during this phase. The error would only be discovered during the preparation of the adjusted trial balance, which reconciles balance sheet and income statement accounts to ensure that they are accurate and complete. This error will affect the trial balance and indicate that there may be an error in the account balances. Therefore, option C is the correct answer. The income statement only reports revenues and expenses and is not used to detect errors in the account balances.

Morgan Company Used Supplies in the Amount of $2,000