Question

If a fee of $2,850 earned from a client was debited to Accounts Receivable for $2,580 and credited to Fees Earned for $2,850, which of the following would be true?
a) The credit total of the trial balance would be higher by $270.
b) b. The debit total of the trial balance would be higher by $270.
c) The wrong account is credited
b) the trial balance total would be equal

Answer 1

Answer:

a) The credit total of the trial balance would be higher by $270

Explanation:

Whenever fee is received from a client, say for $ 2850, the journal entry would be,

Cash/Bank A/C                                       Dr.2850

     To Accounts Receivable                                2850

(Being fee received from a client for a service provided)

The wrong entry passed in the given case being,

Accounts Receivable                              Dr.2580

     To Fees Earned                                                2580

As a trial balance is only a record of all general ledger accounts, wherein the debits equal the credits, this is an example of error of commission wherein wrong amount has been posted.

So, the net effect would be a) credit side of the trial balance would be higher by $270.