Mastering Correction of Accounting Errors

When you have made an advance payment and recorded it in a prepaid account, to figure out the year-end adjustment, ask: "How much of the ____ ____ account balance must be transferred to the ____ account to show the amount used up in the current period?"

prepaid asset; expense

An error not discovered until after the books have been closed is corrected with a(n) ______ ______ _____.

prior period adjustment

Deferred revenue is cash ____ before it is recognized as _____.

received; revenue

An accounting error is defined as the incorrect ____ and ____ of facts about the business that existed at the time a(n) ____ or ____ was recorded.

recording; reporting; event; transaction

A post-closing trial balance should not include a(n) _____ account or a(n) _____ account.

revenue; expense

When your company receives a prepayment, you debit Cash, but you can credit either a(n) ____ account or a(n) ____ account.

revenue; liability

To compute the year-end adjustment for deferred revenue when you record the advance payment in a revenue account, ask: "By what amount must the ____ account balance be ____ to show only the amount earned for the current period?"

revenue; reduced

Most differences between the end-of-month bank balance and cash account balance are caused by differences in _____.

timing

A difference of $540 in the totals may be the result of a(n) ______ or ______.

transposition; slide

The ___ ___ helps to reveal errors by verifying that total ____ ____ debits and credits are in balance.

trial balance; ledger accounts

If an accrual of rent expense was omitted at the end of 20X1, then 20X1 liabilities would be ____ , and income would be _____.

understated; overstated

If interest receivable was not accrued at the end of 20X1, then 20X1 revenues will be _____, and income will be _____.

understated; overstated

If wages payable were not accrued at the end of 20X1, then 20X1 expenses were _____ and 20X1 net income was _____.

understated; overstated

Which of the following is not an accounting error? a. failure to post an entry to the proper account b. failure to post the proper amount to an account c. failure to record a customer's payment d. failure to record that a bill has been contested by a customer

d

Which of these errors can be detected on the unadjusted trial balance? a. failure to record an adjusting entry b. an overstated liability and an overstated expense c. a transaction that was not recorded d. none of these errors can be detected on the unadjusted trial balance

d

Which of these will make the bank balance lower than the book balance? a. a payment your company authorized the bank to make to a third party and which your company has not recorded b. a NSF check c. a deposit in transit d. all of above

d

You prepay rent for two years and debit Prepaid Rent. At the end of the current period, you will show the expense used up for the current period by: a. reducing Rent Expense b. leaving Rent Expense unchanged c. increasing Prepaid Rent d. reducing Prepaid Rent

d

Your company sells 500 season tickets for $100 each for 10 home hockey games to be played from November through March and credits the $50,000 to Ticket Sales Revenue. Four home games were played in 20X1, and 6 are to be played in 20X2. Just before the 20X1 books are closed on December 31, 20X1, you discover that Ticket Sales Revenue has not been adjusted at year end. As a result: a. 20X1 revenue is overstated b. too little revenue from the tickets is deferred for future use c. the correction requires a $30,000 credit to Unearned Ticket Revenue d. all of above

d To compute $500 per game x 10 games payed in 20X1 = $20,000 revenue earned in 20X1. $50,000 prepayment - $20,000 earned in 20X1 = $30,000 that should be credited to Unearned Ticket Revenue.

Marvel, Inc.'s May bank reconciliation includes the following data: a. May 31 end-of-month bank balance: $5,360. b. May 31 Marvel end-of-month Cash account balance: $4,880. c. April 30 deposit in transit recorded on the May bank statement: $300. d. May 31 deposit in transit: $200. e. April 30 checks outstanding deducted on the May bank statement: $260. f. April 30 checks outstanding not deducted on the May bank statement: $75. g. Checks issued by Marvel in May but outstanding as of May 31: $275. h. Service charge recorded on the May bank statement $30. i. Marvel cash on hand (undeposited cash): $80. j. Automatic payment on a note payable to Bryan Co. recorded on the May bank statement but not recorded by Marvel: $500. k. Customer had placed an order which your firm refused to process until it got the cash. May bank statement includes a wire transfer: $1,000. l. Another company's check was deducted from Marvel's May bank statement: $60. 1. Prepare Marvel's May bank reconciliation. 2. Give all required journal entries based on the bank reconciliation.

1. Marvel's May bank reconciliation is as follows: Bank balance as of May 31 $5,360 Add: Cash on hand (undeposited) $80 May deposit in transit 200 280 5,640 Deduct: April outstanding checks 75 May outstanding checks 275 350 Interim May 31 balance 5,290 Add: bank error 60 Adjusted May 31 bank balance 5,350 Book balance as of May 31 Add: wire transfer 1,000 Deduct: bank service charge 30 automatic payment 500 Adjusted May 31 book balance 5,350 2. Marvel must make the following journal entries: Cash 1,000 Sales Revenue 1,000 To record wire transfer Miscellaneous Expense 30 Cash 30 To record bank service charge Note Payable 500 Cash 500 To record automatic payment on note due to Bryan Co. Or os one compound entry: Cash 470* Miscellaneous Expense 30 Note Payable, Bryan 500 Revenue 1,000 To record items from May 31 bank reconciliation *$1,000 debit to Cash - $30 credit to Cash - $500 credit to Cash = $470 total debit to Cash. No adjusting entry is necessary for cash on hand because it is already recorded in the Cash account.

List three routine accounting procedures during which accounting errors may be discovered.

1. Monthly bank reconciliation 2. Preparation of the trial balance 3. Review of periodic adjustments to the accounts 4. Routine internal audits 5. Year-end financial audit

Name three specific accounting activities that may uncover errors.

1. Monthly bank reconciliation 2. Preparation of the trial balance 3. Review of periodic adjustments to the accounts 4. Routine internal audits 5. Year-end financial audit 6. By chance

Name seven common types of accounting errors.

1. Omission (failing to record an event) 2. Accrual or deferral error 3. Classification error 4. Arithmetic mistake 5. Use of an incorrect accounting principle 6. Use of an improper estimate 7. Transposition 8. Slide 9. Posting error

David Company's June bank reconciliation includes the following data: a. June 30 end-of-month bank statement balance: $7,000. b. June 30 end-of-month Cash account balance: $6,250. c. May 31 deposit in transit recorded on the June bank statement: $700. d. June 30 deposit in transit: $500. e. May 31 check outstanding deducted on the June bank statement: $450. f. May 31 outstanding checks not deducted on the June bank statement: $150. g. Checks issued by Davis in June but outstanding as of June 30: $800. h. Service charge recorded on the June bank statement: $40. i. Interest earned on checking account average balance per June bank statement: $15. j. NSF check from G. Slack Co.: $320. k. Note collected by bank for Davis and recorded on the bank statement: $600. l. Canceled check for $205 was credited to Cash as $250. 1. Prepare David's June bank reconciliation. 2. Give all required journal entries to correct any errors.

1. The Davis company June bank reconciliation is as follows: Bank balance as of June 30 $7,000 Add: June deposit in transit 500 7,500 Deduct: May outstanding checks 150 June outstanding checks 800 950 Adjusted June 30 bank balance 6,550 Book balance as of June 30 Add: interest income 15 note collection 600 615 6,865 Decuct: service charge 40 NSF check 320 360 6,505 Add: error correction 45 Adjusted June 30 book balance 6,550 2. Davis Company must make the following journal entries: Cash 15 Interest Income 15 To record interest on average bank account balance Cash 600 Note Receivable 600 To record note collected by bank from Simpson Co. Cash 45 Accounts Payable 45 To correct error Miscellaneous expense 40 Cash 40 To record bank service charge Account Receivable, G. Slack 320 Cash 320 To record NSF check of G. Slack returned by bank Or as one compound entry: Cash 300* Miscellaneous Expense 300 Accounts Receivable 320 Interest Income 15 Note Receivable 600 Accounts Payable 45 To record items from bank reconciliation *$660 total debits - $360 total credits = $300 debit to Cash (to balance)

What are the three primary goals of bank reconciliation? 1. 2. 3.

1. To review information needed to bring company accounting records up to date at the end of the month or other period; 2. to verify that the ledger Cash account balance at the end of the month or other period is accurate and to correct any errors; and 3. to verify that the checking account balance at the end of the month or other period is accurate and to alert the bank of any errors.

List three errors that do not cause a difference in trial balance totals. 1. 2. 3.

1. a transaction not recorded on company books. 2. the same incorrect amount recorded on both the debit and credit side of a journal entry 3. an amount recorded in an incorrect account that has the same debit or credit balance as the correct account (such as an amount debited to Rent Expense instead of Equipment or credited to Revenue instead of Accounts Payable).

If trial balance total debits are $70 more than total credits, there may be an error of $_____, caused by listing the $35 balance in the ____ column.

35; debit

Define: c. NSF check

A NSF check is a check returned by the bank for "not sufficient funds".

Upon completion of a bank reconciliation, the company records adjustments to the ledger _____ account.

Cash

Define: a. Deposits in transit

Deposits in transit are deposits made by the company but not yet recorded by the bank.

If there is a Notes Payable balance on the adjusted trial balance, you would also expect to see other accounts: _________ _______ and ________ ______.

Interest Payable; Interest Expense

Failure to accrue interest revenue during the current year will result in as understatement of the two balance sheet accounts _____ and _____.

Interest Receivable; Retained Earnings. As a result of Interest Receivable being understated, net income will also be understated, and when net income is closed out to Retained Earnings, Retained Earnings will be understated as well.

Define: b. Outstanding checks

Outstanding checks are checks written, recorded and disbursed by the company but not yet paid by the bank.

In 20X4, accrued advertising expense of $7,500 was incorrectly recorded as $9,000. a. Show the correction for this error if it is discovered in 20X4.

The correction for this error if it is discovered in the same year (20X4) is a simple entry to reduce the amount of the overstatement: Advertising Payable 1,500 Advertising Expense 1,500

In 20X4, accrued advertising expense of $7,500 was incorrectly recorded as $9,000. b. Show the effect of the error on the 20X4 income statement if the error is not discovered until 20X5.

The effect of the error on the 20X4 income statement if it is not discovered until 20X5 is as follows: Advertising expense overstated by $1,500 Net income understated by $1,500

Define: d. Reconciled Cash balance

The reconciled Cash balance is the Cash balance that should be reported on the balance sheet as an asset of the company, i.e., the correct Cash balance.

A $120,000 difference in trial balance totals may be caused by: a. the Accumulated Depreciation balance of $60,000 being listed as debit b. the Accumulated Depreciation balance of $60,000 being listed as credit c. the Purchases balance being listed as a $60,000 debit d. the Purchases balance being listed as a $120,000 debit

a

A more precise definition of prior period error would include one that is found... a. after the income statement accounts have been closed for the year in which the errors were made b. after the balance sheet accounts have been closed for the year in which the errors were made c. after either the balance sheet accounts or the income statement accounts have been closed for the year in which the errors were made d. after December 31 or the year in which they occurred

a

Asset accounts... a. have a debit balance b. have a credit balance c. may have a debit or a credit balance d. appear only on the unadjusted trial balance

a

Deferral errors affect: a. both the income statement and balance sheet b. only the income statement c. only the balance sheet d. different statements depending upon the particular deferral

a

Expense accounts... a. have a debit balance b. have a credit balance c. may have a debit balance or a credit balance d. appear only on the post-closing trial balance

a

If you find another company's canceled check for $450 recorded on your bank statement, you correct the error by: a. adding $450 to the end-of-month bank balance b. adding $450 to the end-of-month Cash balance c. deducting $450 from the end-of-month bank balance d. deducting $450 from the end-of-month Cash balance

a

In December, your company sublets and receives payment for four months in advance - December, January, February and March - crediting Rent Received in Advance for the full payment. On December 31, you show the revenue earned for the current period by: a. reducing Rent Received in Advance b. increasing Rent Received in Advance c. leaving Rent Received in Advance unchanged d. reducing Rent Expense

a

In December, your company sublets space and receives payment for four months in advance - December, January, February and March - crediting Rent Revenue for the full payment. On December 31, you show the revenue earned for the current period by: a. reducing Rent Revenue b. increasing Rent Revenue c. leaving Rent Revenue unchanged d. reducing Rent Revenue in Advance

a

To find the correct bank statement cash balance for a reconciliation: a. deduct from the end-of-month bank balance all checks outstanding b. deduct from the end-of-month bank balance only those checks outstanding that were written in the current period c. deduct from the end-of-month bank balance checks outstanding that were written in the current period and add checks outstanding that were written in previous periods d. add to the end-of-month bank balance all checks outstanding

a

You prepay rent for two years and debit Rent Expense. At the end of the current period, you will show the expense used up for the current period by: a. reducing Rent Expense b. increasing Rent Expense c. leaving Rent Expense unchanged d. reducing Prepaid Rent

a

Your company's payment of $500 was debited to Cash. This is... a. a posting error b. a classification error c. an arithmetic mistake d. a slide

a

You are given the following bank statement and Cash account transactions and items for the bank reconciliation. Bank statement April 30 balance $x,xxx Additions ____________ Deductions _________ Adjusted April 30 cash balance $x,xxx Company Cash account April 30 balance $x,xxx Additions ___________ Deductions ________ Adjusted April 30 cash balance $x,xxx a. There is company cash on hand. b. A deposit was mailed on April 30 and received by the bank on May 1. c. Checks written in March have not cleared the bank as of April 30. d. Checks drawn in April have not cleared the bank as of April 30. e. A credit memorandum was issued for a bank error the company reported in March, f. An April 30 credit memorandum was issued for a wire transfer of foreign funds. g. The company misposted an $800 deposit to Cash as a debit of $80. For each item above, insert the number of the appropriate action. 1 - Add to the end-of-month bank balance 2 - Deduct from the end-of-month bank balance 3 - Add to the end-of-month Cash balance 4 - Deduct from the end-of-month Cash balance 5 - No action required

a. 1 Add to the end-of-month bank balance b. 1 Add to the end-of-month bank balance c. 2 Deduct from the end-of-month bank balance d. 2 Deduct from the end-of-month bank balance e. 5 No action required; this was added to the bank statement balance in the March reconciliation. f. 3 Add to the end-of-month Cash balance g. 3 Add ($720) to the end-of-month Cash balance ($800 correct amount - $80 already entered = $720 entered to make correct amount).

You are doing a bank reconciliation with the following balances: Bank statement June 30 balance $x,xxx Additions ___________________ Deductions ________________ Adjusted June 30 bank balance $x,xxx Company Cash account June 30 balance $x,xxx Additions ______________ Deductions ____________ Adjusted June 30 Cash balance $x,xxx Numbers 1-5 describe the action to take with the items in the bank reconciliation: 1 - Add to the end-of-month bank balance 2 - Deduct from the end-of-month bank balance 3 - Add to the end-of-month Cash balance 4 - Deduct from the end-of-month Cash balance 5 - No action required For each item and event below, insert the number of the appropriate action: a. On July 2, you receive a letter from the bank saying that it collected a note for the company on June 29. b. Two checks written in June had not cleared the bank as of June 30. c. Another firm's check was included with the company's June 30 bank statement and deducted on the bank account. d. A May deposit in transit was recorded on the June 30 bank statement. e. A company deposit was mailed on June 30 and received by the bank on July 1. f. A memo was included with the June 30 bank statement charging the company for printing its checks. g. You discovered that a cash receipt entered in the company journal was never posted to Cash.

a. 3 Add to the end-of-month Cash balance. b. 2 Deduct from the end-of-month bank balance. c. 1 Add to the end-of-month bank balance. d. 5 No action required; this was added in the May bank reconciliation. e. 1 Add to the end-of-month bank balance. f. 4 Deduct form the end-of-month Cash balance. g. 3 Add to the end-of-month Cash balance.

You issued a check for $457 but recorded it at $475. In your bank reconciliation, you will: a. Add $18 to the end-of-month bank balance b. Add $18 to the end-of-month book balance c. Deduct $18 from the end-of-month bank balance d. Deduct $18 from the end-of-month book balance

b

If the trial balance does not balance, the steps to take, in the correct order, are as follows: 1. Make sure the ______ _____ were correctly transferred to the ______ ______.

account balances; trial balances

The correction of an error is determined by which ____ are affected and ____ the error was found.

accounts; when

If an accrue revenue is understated and the error is discovered in the same accounting period, a correction is made with a(n) _____ journal entry for the amount of the error.

adjusting

An error in depreciation expense is likeliest to be discovered when ____ are made to the accounts.

adjustments

When a bank or creditor inquires about company finances, the ledger Cash account usually cannot be reported as a(n) _____ until it has been reconciled.

asset

Current period errors are those made and found... a. before the balance sheet accounts have been closed b. before the income statement accounts have been closed c. before either the balance sheet accounts or the income statement accounts have been closed d. before December 31 of the year in which they occurred

b

If a company calculates bad debt expenses at 1% of sales but the percentage used was 5% of sales, this is... a. a transposition error b. use of an improper estimate c. a slide error d. use of an incorrect accounting principle

b

In 20X1, the accrual of rent expense was overstated by $1,000. A correcting entry made before the books are closed would include: a. a debit to Rent Expense for $1,000 b. a credit to Rent Expense for $1,000 c. a credit to Rent Payable for $1,000 d. a credit to Cash for $1,000

b

In a bank reconciliation, which of the following items are added to the end-of-month ledger Cash account balance? a. outstanding checks b. interest earned on average checking account balance c. deposits in transit from the month covered by the bank statement d. none of the above

b

Liability accounts... a. have a debit balance b. have a credit balance c. may have a debit balance or a credit balance d. appear only on the post-closing trial balance

b

When reconciling the Cash account, direct deposits such as wire transfers are: a. deducted from the Cash balance b. added to the Cash balance c. deducted from the bank balance d. added to the bank balance

b

Which of the following is not correct? a. A trial balance can be taken at any time. b. A trial balance calculates the total assets of a company at a particular time and the net income of a company over a specified period of time. c. All accounts with a balance are included on the trial balance. d. A trial balance is usually prepared before the financial statements.

b

Which of the following is not used to detect accounting errors? a. monthly bank reconciliations b. prior period adjustments c. monthly trial balances d. internal audits

b

You discover before the books are closed that $800 of salary expense was not accrued. To correct this error, you would... a. record $800 of salary expense when salaries are paid next period b. simply record the accrual of $800 of salary expense before the books are closed c. do nothing because accruals do not involve cash d. wait until after the books are closed ad then record the accrual of $800 of salary expense

b

Depreciation Expense for the building your company has owned for several years is listed on: a. the unadjusted trial balance b. the adjusted trial balance c. the post-closing trial balance d. all of above

b Depreciation expense on the building your company owns is recorded in an adjusting entry and therefore does not appear on the unadjusted trial balance, but on the adjusted trial balance. In fact, it is called the adjusted trial balance because it includes the adjusting entries. Depreciation expense will not appear on the post-closing trial balance because it has been closed out with the other expense accounts.

On the trial balance, total debits are $38,200 and total credits are $41,800. This error may have been caused by a transposition in... a. the Inventory Balance of $920 b. the Accumulated Depreciation balance of $7,300 c. the Accounts Payable balance of $360 d. the Retained Earnings balance of $2600

b Either debits are understated by $3,600 or credits are overstated by $3,600. Eliminate Inventory and Accounts Payable because the error is too small. Credit balances: $7,300 7,300 - 3,700 = 3,600 D $2,600 6,200 - 2,600 = 3,600 I Total debits: $38,200 Total credits: $41,800 - 3,600 = $38,200

You discover a $900 difference in your trial balance totals. You have narrowed your investigation to the following account balances. Which one(s) may contain a transposition? (There may be more than one possible answer). a. Cash $170 b. Cost of Goods Sold $2,300 c. Taxes Payable $310 d. Additional Paid-In Capital $1,200

b or d Total debits are $900 more than total credits.9 first digit of the difference + 1 = 10. However, you cannot have a difference of 10 between two digits, so the number 1 is used. There are two account balances that may be the cause of the error: b. Cost of Goods Sold $2,300 (2 first digit - 3 second digit = 1), and d. Additional Paid-In Capital $1,200 (1 first digit - 2 second digit = 1).

Internal accounting controls... a. are part of every company's accounting system b. prevent accounting errors c. guarantee reliable accounting information d. help to ensure the reliability of accounting information

d

Just before the books are closed you discover that $1,400 of interest expense was accrued when only $1,200 should have been accrued. To correct this error you would... a. wait until the interest is paid next period and then record $200 of prepaid interest b. do nothing because accruals do not involve cash c. record an adjusting entry before the books are closed that reduces interest expense and interest payable by $200 d. next period do nothing this period but accrue $200 less interest expense after the books for this period are closed

c

On October 1, 20X0, your company rented office space for $1,000 a month and received a check for $6,000 for the first six months' rent. You recorded the $6,000 as rent revenue. On December 31, 20X0, an adjusting entry was made debiting Rent Revenue and crediting Rent Received in Advance for $4,000. Which of the following statements about the 20X0 accounts is true? a. All accounts are correctly stated. b. 20X0 net income is overstated by $1,000. c. 20X0 liabilities at year end are overstated by $1,000. d. 20X0 assets are correctly stated.

c

On September 1, 20X1, your company paid $6,000 in advance to advertise in a local paper for the six months September 1, 20X1 - March 1, 20X2, and debited Advertising Expense. After the 20X1 books were closed, you discover that 20X1 Advertising Expense had not been adjusted at year end. Which of the following statements about the 20X1 accounts is true? a. 20X1 net income was understated by $6,000. b. Total assets are understated by $5,000. c. Prepaid Advertising is understated by $2,000. d. There is no error because only income statement accounts are affected.

c

Which of the following accounts may appear on all the unadjusted, adjusted, and post-closing trial balances? a. Purchases b. Purchase Discounts c. Notes Payable d. all of above

c

The bank statement balance of $7,000 does not include a check outstanding of $1,000, a deposit in transit of $325, but does include a bank service charge of $25 and another company's $100 check erroneously charged against your firm's account (not recorded in the Cash account). The reconciled bank balance is: a. $6,400 b. $6,575 c. $6,425 d. 6,625

c $7,000 end-of-month bank balance + $325 deposit in transit - $1,000 checks outstanding +$100 for check erroneously charged to your firm's account = $6,425 reconciled bank balance. The $25 bank service charge deducted to adjust the Cash account is not used to adjust the bank balance.

If depreciation expense of $1,000 is posted as $100, this is... a. a transposition error b. a classification error c. a slide error d. use of an incorrect accounting principle

c This is a slide error because the decimal point has been moved one digit to the left.

Missing or inaccurate accruals are often found... a. when an expense is paid b. when revenue is received c. when the financial statements are prepared d. all of above

d

SiliCo painted its building at a cost of $10,000 and decided to capitalize it (debit Buildings), instead of expensing it (debit Repairs and Maintenance Expense). This is... a. a transposition error b. a classification error c. an improper estimate d. use of an incorrect accounting principle

d

Errors that affect revenue or expense accounts from prior periods cannot be directly corrected because these account balances have been ______.

closed

When an account balance seems to be in the wrong column on the trial balance, it may be an error - or it may be the correct balance of a(n) ______ _____.

contra account

A bank _____ memorandum shows an amount added by the bank to the company checking account; a bank _____ memorandum shows an amount subtracted by the bank from the company checking account.

credit; debit

A company check is a _____ to Cash, but is a _____ on the bank statement.

credit; debit

Cash deposits in the company checking account are a _____ to the company bank statement, but a ____ to the company ledger Cash account.

credit; debit

______ period errors affect revenue and expense accounts that are still open.

current

A canceled check written for $110 is enclosed in your company's bank statement, but the statement shows that the check cleared for $100. When you do the bank reconciliation, you should... a. add $10 to the bank balance b. add $10 to the ledger Cash account balance c. subtract $10 from the ledger Cash account balance d. subtract $10 from the bank balance

d

A correcting entry is the same as the adjusting entry for errors when... a. the books have been closed b. the amount was recorded to an expense account c. an expense was recorded to the wrong expense account d. an expense that was not accrued is discovered before the books are closed

d

A rent payment check issued for $450 was recorded as a credit to Cash for $540. This is... a. a slide b. an incorrect account classification c. an arithmetic mistake d. a transposition error

d

CabotCo's accountant forgot to record annual interest expense. This is... a. a transposition error b. an arithmetic mistake c. use of an incorrect accounting principle d. an accrual error

d

In the revenue section of the trial balance, you should not see a balance in the _____ column, unless it is for a revenue ____ _____.

debit; contra account

When the bank returns a NSF check, it issues a _____ (debit/credit) memorandum that appears on the company bank statement; the company must then _____ (debit/credit) the ledger Cash account for the amount of the NSF check.

debit; credit

If you initially record revenue received in advance in a revenue account, the subsequent adjusting entry would ____ the revenue account and ____ a ____ account.

decrease or debit; increase or credit; liability

To reconcile the monthly bank balance, a $630 check outstanding is ______ ______ the current bank balance.

deducted from

When your company makes a prepayment, you credit Cash, but you can debit either a(n) _____ account or a prepaid ______ account.

expense; asset

When an advance payment is recorded to an expense account, to figure out the year-end adjustment, ask: "By what amount must the _____ account balance be _____ to show only the amount used up in the current period?"

expense; reduced

Errors may be uncovered in the year-end financial audit by the ____ ____.

external auditor

The balance of an account is the side of the account - whether debit or credit - on which a(n) ______ is recorded.

increase

If the trial balance does not balance, the steps to take, in the correct order, are as follows: 3. Check the ____ ____ and ____ for errors.

journal entries; postings

If the trial balance does not balance, the steps to take, in the correct order, are as follows: 2. See if the ____ ____ ____ have been calculated correctly.

ledger account balances

When you have recorded receipt of an advance payment in a liability account, to compute the year-end adjustment for the deferred revenue, ask: "How much of the ____ account balance must be transferred to the ____ account to show the amount earned in the current period?"

liability (or unearned revenue or revenue received in advance); revenue

A contra account has a(n) ____ balance from its related account.

opposite

A deferred expense is one in which cash is ____ before it is _____ as an expense.

paid; recognized

Accounting errors correction depends on the ____ in which the error is discovered.

period

A $300 payment of an electric bill debited to Cash is a(n) ______ error.

posting