Multiple Choice
Which of the following best describes the effect of recording a cash sale on the journal entries using debits and credits?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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A \$15 credit to revenue was mistakenly posted as a \$150 credit. By what amount is the revenue account in error?
A
\$165 overstated
B
\$135 understated
C
\$150 understated
D
\$135 overstated
Verified step by step guidance1
Step 1: Understand the problem. A \$15 credit to revenue was mistakenly posted as a \$150 credit. This means the revenue account was credited \$135 more than it should have been.
Step 2: Calculate the difference between the correct amount (\$15) and the incorrect amount (\$150). Use the formula: \( \text{Error Amount} = \text{Incorrect Amount} - \text{Correct Amount} \).
Step 3: Substitute the values into the formula: \( \text{Error Amount} = 150 - 15 \).
Step 4: Recognize that the revenue account is overstated because the incorrect posting increased the revenue account by \$135 more than it should have.
Step 5: Conclude that the revenue account is overstated by \$135, as the error caused an excess credit to the account.
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