Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

When you need to edit a previously recorded transaction in the accounting records, which of the following are the two primary methods used?

Record an adjusting entry to correct the error

Erase the original entry from the ledger

Reverse the original entry and record a new, correct entry

Ignore the error if it is immaterial

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Verified step by step guidance

Step 1: Understand the context of the problem. In accounting, errors in previously recorded transactions can occur, and it is important to know the proper methods to correct them. The goal is to ensure the financial records are accurate and comply with accounting principles.

Step 2: Learn about the two primary methods for correcting errors. The first method is to record an adjusting entry to correct the error. This involves creating a new journal entry that adjusts the accounts affected by the error without erasing the original entry.

Step 3: Understand the second method, which is reversing the original entry and recording a new, correct entry. This method involves creating a journal entry that negates the effects of the incorrect entry (reversal) and then recording the correct transaction.

Step 4: Recognize that erasing the original entry from the ledger is not a recommended practice in accounting. It violates the principle of maintaining an audit trail, which is essential for transparency and accountability.

Step 5: Note that ignoring the error if it is immaterial may be acceptable in certain cases, as immaterial errors do not significantly impact the financial statements. However, material errors must always be corrected using one of the two primary methods mentioned above.