Financial Accounting Quiz: Correcting Journal Entry Errors
20 questions · exam conditions
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Correcting Journal Entry ErrorsQuestion 1 of 20

A company purchased equipment for $15,000 cash. The bookkeeper recorded the transaction by debiting Repair and Maintenance Expense for $15,000 and crediting Cash for $15,000. The error was discovered a week later, before any adjusting entries were made. The correcting journal entry should include which of the following?

A credit to Cash for $15,000.
A debit to Equipment for $15,000 and a credit to Repair and Maintenance Expense for $15,000.
A debit to Equipment for $15,000 and a credit to Cash for $15,000.
A debit to Cash for $15,000 and a credit to Repair and Maintenance Expense for $15,000.
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Financial Accounting Quiz

Financial Accounting Quiz: Correcting Journal Entry Errors

Practice Correcting Journal Entry Errors in Financial Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Correcting Journal Entry Errors, giving you a quick way to practice the rules, question types, and explanations that matter most for Financial Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

A company purchased equipment for $15,000 cash. The bookkeeper recorded the transaction by debiting Repair and Maintenance Expense for $15,000 and crediting Cash for $15,000. The error was discovered a week later, before any adjusting entries were made. The correcting journal entry should include which of the following?

  1. A credit to Cash for $15,000.
  2. A debit to Equipment for $15,000 and a credit to Repair and Maintenance Expense for $15,000. (correct answer)
  3. A debit to Equipment for $15,000 and a credit to Cash for $15,000.
  4. A debit to Cash for $15,000 and a credit to Repair and Maintenance Expense for $15,000.
Explanation: The original entry incorrectly debited an expense account instead of an asset account (an error of principle). The credit to Cash was correct and does not need to be changed. The correcting entry must reclassify the amount from the expense account to the asset account. This is accomplished by debiting the correct account (Equipment) for $15,000 and crediting the incorrect account (Repair and Maintenance Expense) for $15,000 to remove the erroneous debit.

Question 2

A check for $670 was issued to pay for office supplies. The bookkeeper recorded the transaction as a debit to Office Expense for $760 and a credit to Cash for $760. To correct this compound error (transposition and principle), what journal entry is required?

  1. Debit Cash $90; Credit Office Expense $90.
  2. Debit Office Supplies $670; Debit Cash $90; Credit Office Expense $760. (correct answer)
  3. Debit Office Expense $90; Credit Cash $90.
  4. Debit Office Supplies $760; Credit Office Expense $670; Credit Cash $90.
Explanation: The incorrect entry overstated both Office Expense and the credit to Cash by 90(90 (760 - $670). It also debited the wrong account (Office Expense instead of Office Supplies). The correcting entry must: 1) remove the entire incorrect debit from Office Expense with a $760 credit; 2) record the correct debit to Office Supplies for $670; and 3) correct the Cash account by debiting it for the $90 overstatement. The entry Debit Office Supplies $670, Debit Cash $90, and Credit Office Expense $760 accomplishes all three corrections.

Question 3

During a bank reconciliation, it was discovered that a customer's check for $500, previously deposited and recorded, was returned for non-sufficient funds (NSF). Before this discovery, the company's records showed a cash balance of $8,000 and accounts receivable of $12,000. No correcting entry has been made yet. What is the journal entry needed to correct for this NSF check?

  1. Debit Cash $500; Credit Accounts Receivable $500.
  2. Debit Accounts Receivable $500; Credit Cash $500. (correct answer)
  3. Debit Bad Debt Expense $500; Credit Allowance for Doubtful Accounts $500.
  4. Debit Miscellaneous Expense $500; Credit Cash $500.
Explanation: An NSF check is not an error in the initial recording, but it requires a correcting entry to adjust the books to reality. The bank has reduced the company's cash balance, so the company must do the same by crediting Cash. Since the customer's payment was not actually received, the amount they owe is reinstated. This is done by debiting Accounts Receivable. The entry effectively reverses the original cash receipt entry for this specific customer.

Question 4

In late 20X1, a company received a utility bill for $980. The bookkeeper made a journal entry debiting Utilities Expense for $890 and crediting Accounts Payable for $890. The error was discovered in early 20X2 after the 20X1 financial statements were issued and the books were closed. What correcting entry should be made in 20X2?

  1. Debit Utilities Expense $90; Credit Accounts Payable $90.
  2. Debit Retained Earnings $90; Credit Accounts Payable $90. (correct answer)
  3. Debit Utilities Expense $980; Credit Accounts Payable $980.
  4. Debit Retained Earnings $890; Credit Accounts Payable $890.
Explanation: The original entry understated both Utilities Expense and Accounts Payable by 90(90 (980 - $890). Since the error occurred in a prior period (20X1) and the books are now closed, the expense account cannot be corrected directly. The understatement of expense caused net income in 20X1 to be overstated, and therefore Retained Earnings is overstated. The correction in 20X2 must debit Retained Earnings to reduce it by the $90 error and credit Accounts Payable to correctly state the liability.

Question 5

A bookkeeper for a corporation recorded the payment of a $5,000 cash dividend by debiting Salaries Expense and crediting Cash. The error is discovered before closing entries are made. What is the correct journal entry to fix this error?

  1. Debit Dividends; Credit Salaries Expense. (correct answer)
  2. Debit Retained Earnings; Credit Salaries Expense.
  3. Debit Dividends; Credit Cash.
  4. Debit Cash; Credit Salaries Expense.
Explanation: The original entry incorrectly debited Salaries Expense. The correct account to debit for the declaration and payment of a dividend is the Dividends account. The credit to Cash was correct. To fix the error, the incorrect debit to Salaries Expense must be removed with a credit, and the correct debit to Dividends must be recorded. Since closing entries have not been made, the Dividends account (a temporary equity account) is the appropriate account to use, not Retained Earnings directly.

Question 6

On November 1, a company received a $9,000 payment from a tenant for six months of rent in advance. The entire amount was credited to Rent Revenue. On December 31, the error is discovered before closing entries are prepared. What correcting entry is necessary?

  1. Debit Rent Revenue $6,000; Credit Unearned Rent Revenue $6,000. (correct answer)
  2. Debit Rent Revenue $9,000; Credit Unearned Rent Revenue $9,000.
  3. Debit Unearned Rent Revenue $3,000; Credit Rent Revenue $3,000.
  4. Debit Rent Revenue $3,000; Credit Unearned Rent Revenue $3,000.
Explanation: The initial entry incorrectly recognized all $9,000 as revenue. By Dec 31, two months (Nov, Dec) of rent have been earned. Monthly rent is $9,000 / 6 = $1,500. Earned revenue is 2 * $1,500 = $3,000. Unearned revenue is 4 * $1,500 = $6,000. The accounts currently show Rent Revenue of $9,000 and Unearned Revenue of $0. They should show Rent Revenue of $3,000 and Unearned Revenue of $6,000. To correct this, Rent Revenue must be debited by 6,000(6,000 (9,000 - $3,000) and Unearned Rent Revenue must be credited by $6,000.

Question 7

A company rents a small office space to another business. A cash receipt of $1,000 for one month's rent was recorded by debiting Cash and crediting Sales Revenue. Which journal entry is needed to correct this error of principle?

  1. Debit Sales Revenue $1,000; Credit Unearned Rent Revenue $1,000.
  2. Debit Rent Revenue $1,000; Credit Sales Revenue $1,000.
  3. Debit Cash $1,000; Credit Rent Revenue $1,000.
  4. Debit Sales Revenue $1,000; Credit Rent Revenue $1,000. (correct answer)
Explanation: The initial entry correctly recorded the debit to Cash but credited the wrong revenue account. Sales Revenue is used for revenue from the primary operations of the business (selling goods or services), while Rent Revenue should be used for incidental income from renting property. The correcting entry must remove the amount from the incorrect revenue account (by debiting Sales Revenue) and place it in the correct revenue account (by crediting Rent Revenue).

Question 8

A company collected $4,500 cash from a customer on account. The bookkeeper erroneously debited Accounts Receivable and credited Cash for $4,500. Which of the following journal entries will correct this error?

  1. Debit Cash $4,500; Credit Accounts Receivable $4,500.
  2. Debit Accounts Receivable $4,500; Credit Cash $4,500.
  3. Debit Cash $9,000; Credit Accounts Receivable $9,000. (correct answer)
  4. Debit Sales Revenue $4,500; Credit Accounts Receivable $4,500.
Explanation: The incorrect entry (Dr. Accounts Receivable $4,500; Cr. Cash $4,500) increased Accounts Receivable and decreased Cash. The correct entry should have been (Dr. Cash $4,500; Cr. Accounts Receivable $4,500). To correct the error, the effects of the incorrect entry must be reversed, and the effects of the correct entry must be recorded. This requires increasing Cash by $9,000 (to reverse the incorrect $4,500 credit and record the correct $4,500 debit) and decreasing Accounts Receivable by $9,000 (to reverse the incorrect $4,500 debit and record the correct $4,500 credit).

Question 9

On July 1, a company paid $12,000 for a one-year insurance policy. The bookkeeper debited Insurance Expense for the full amount and credited Cash. The error is discovered on December 31 as part of the year-end review, before adjusting entries for the period have been made. What is the correcting journal entry required on December 31?

  1. Debit Prepaid Insurance $12,000; Credit Insurance Expense $12,000.
  2. Debit Prepaid Insurance $6,000; Credit Insurance Expense $6,000. (correct answer)
  3. Debit Insurance Expense $6,000; Credit Prepaid Insurance $6,000.
  4. Debit Prepaid Insurance $12,000; Credit Cash $12,000.
Explanation: The initial entry incorrectly expensed the entire 12,000.ThecorrectinitialentryshouldhavebeenadebittoPrepaidInsurance.ByDecember31,sixmonthsofinsurancehaveexpired(12,000. The correct initial entry should have been a debit to Prepaid Insurance. By December 31, six months of insurance have expired (12,000 / 12 months * 6 months = $6,000). The accounts should reflect a $6,000 balance in Prepaid Insurance and a $6,000 balance in Insurance Expense. The original incorrect entry created a $12,000 debit in Insurance Expense. To correct this to the proper $6,000 balance, Insurance Expense must be credited for $6,000. To establish the proper $6,000 asset balance, Prepaid Insurance must be debited for $6,000. Thus, the correcting entry is to debit Prepaid Insurance for $6,000 and credit Insurance Expense for $6,000.

Question 10

On December 31, 20X1, a company failed to record an adjusting entry for $2,500 of wages that employees had earned but not yet been paid. The error was discovered on January 15, 20X2, after the closing process for 20X1 was complete. The correcting entry on January 15, 20X2, should be:

  1. Debit Wages Expense $2,500; Credit Wages Payable $2,500.
  2. Debit Wages Expense $2,500; Credit Cash $2,500.
  3. Debit Retained Earnings $2,500; Credit Wages Payable $2,500. (correct answer)
  4. Debit Retained Earnings $2,500; Credit Cash $2,500.
Explanation: The omission of the adjusting entry in 20X1 caused Wages Expense to be understated and Net Income (and thus Retained Earnings) to be overstated. The liability, Wages Payable, was also understated. Since the 20X1 books are closed, the correction cannot be made to the 20X1 Wages Expense account. Instead, Retained Earnings must be debited to correct the prior period's overstatement. Wages Payable must be credited to recognize the liability that existed at year-end.

Question 11

A payment of $832 to a creditor on account was recorded with a debit to Accounts Payable for $823 and a credit to Cash for $823. The error is found before the end of the accounting period. The correcting journal entry will be:

  1. Debit Accounts Payable $9; Credit Cash $9. (correct answer)
  2. Debit Cash $9; Credit Accounts Payable $9.
  3. Debit Accounts Payable $832; Credit Cash $832.
  4. Debit Accounts Payable $823; Debit Cash $9; Credit Accounts Payable $9; Credit Cash $823.
Explanation: This is a transposition error. Both Accounts Payable and Cash were understated by 9(9 (832 - $823). To correct the entry, the accounts must be adjusted by the difference. Accounts Payable needs to be debited for an additional $9 to reflect the full reduction in the liability. Cash needs to be credited for an additional $9 to reflect the full cash outflow. Therefore, the correcting entry is a debit to Accounts Payable for $9 and a credit to Cash for $9.

Question 12

A company purchased inventory on account from Supplier X for $3,600. The journal entry was correctly recorded. However, when posting to the subsidiary ledger, the amount was credited to the account for Supplier Y. Which of the following is the required correcting entry in the general journal?

  1. Debit Accounts Payable - Supplier Y; Credit Accounts Payable - Supplier X.
  2. Debit Inventory; Credit Accounts Payable - Supplier Y.
  3. Debit Accounts Payable - Supplier X; Credit Accounts Payable - Supplier Y.
  4. No correcting entry is needed in the general journal. (correct answer)
Explanation: The question states that the journal entry was correctly recorded in the general journal (Dr. Inventory, Cr. Accounts Payable). The error occurred when posting from the general journal to the subsidiary ledger, which tracks individual supplier balances. This is a posting error, not a journal entry error. The general ledger control account for Accounts Payable is correct, and the trial balance will balance. The correction needs to be made within the accounts payable subsidiary ledger by removing the incorrect credit from Supplier Y and adding the correct credit to Supplier X. No new general journal entry is required.

Question 13

A company made two separate, unrelated errors in the same accounting period: (1) A $1,200 payment for advertising was debited to Office Supplies. (2) A $1,200 purchase of office equipment on account was debited to Office Supplies. Both errors are discovered simultaneously. What single compound journal entry will correct these errors?

  1. Debit Advertising Expense $1,200; Debit Office Equipment $1,200; Credit Office Supplies $2,400. (correct answer)
  2. Debit Office Supplies $2,400; Credit Advertising Expense $1,200; Credit Office Equipment $1,200.
  3. Debit Advertising Expense $1,200; Debit Office Equipment $1,200; Credit Accounts Payable $1,200; Credit Cash $1,200.
  4. Debit Advertising Expense $1,200; Credit Office Supplies $1,200.
Explanation: These are compensating errors within the Office Supplies account, which is overstated by $2,400. To correct the first error, Advertising Expense should be debited and Office Supplies should be credited for $1,200. To correct the second error, Office Equipment should be debited and Office Supplies should be credited for $1,200. A compound entry can combine these corrections: Debit Advertising Expense $1,200, Debit Office Equipment $1,200, and Credit Office Supplies for the total of $2,400.

Question 14

A company's trial balance shows total debits of $254,300 and total credits of $251,600. The difference of $2,700 is determined to be from a single error. Which of the following errors would most likely explain this specific imbalance?

  1. A cash sale of $2,700 was debited to Cash but the credit to Sales Revenue was omitted.
  2. The purchase of equipment on account for $2,700 was completely omitted from the journal.
  3. A credit to Accounts Payable for $1,350 was erroneously posted as a debit. (correct answer)
  4. A debit to Rent Expense was incorrectly posted as $2,970 instead of $270.
Explanation: The trial balance has an excess of debits over credits of $2,700. If a credit of $1,350 was posted as a debit, the credit side would be missing $1,350 and the debit side would be overstated by $1,350. The total difference between debits and credits would be $1,350 + $1,350 = $2,700, matching the imbalance. A) would cause an imbalance of $2,700 but is only one possibility. C is more specific and a classic error type. B) would not cause an imbalance. D) would cause an excess of debits of $2,700, but the numbers do not suggest a transposition or slide error.

Question 15

A company paid an invoice for $4,000 within a discount period with terms 2/10, n/30. The bookkeeper recorded the payment by debiting Accounts Payable for $4,000 and crediting Cash for $4,000, using the gross method of recording purchases. What is the required correcting entry?

  1. Debit Cash $80; Credit Accounts Payable $80.
  2. Debit Purchase Discounts $80; Credit Cash $80.
  3. Debit Accounts Payable $80; Credit Purchase Discounts $80.
  4. Debit Cash $80; Credit Purchase Discounts $80. (correct answer)
Explanation: The company was entitled to a 2% discount, which is $4,000 * 0.02 = $80. The actual cash paid was $3,920. The incorrect entry overstated the cash payment by $80 and failed to recognize the purchase discount. The debit to Accounts Payable for the full $4,000 is correct under the gross method. To correct the error, the Cash account must be debited for $80 to reverse the overpayment, and the Purchase Discounts account must be credited for $80 to recognize the savings.

Question 16

A company sold equipment for $8,000 cash. The equipment had a cost of $30,000 and accumulated depreciation of $25,000 at the time of sale. The bookkeeper, confused about the transaction, debited Cash for $8,000 and credited Equipment for $8,000. What correcting entry is required?

  1. Debit Accumulated Depreciation $25,000; Credit Equipment $22,000; Credit Gain on Sale $3,000. (correct answer)
  2. Debit Accumulated Depreciation $25,000; Debit Loss on Sale $3,000; Credit Equipment $22,000.
  3. Debit Cash $8,000; Debit Accumulated Depreciation $25,000; Credit Equipment $30,000; Credit Gain on Sale $3,000.
  4. Debit Equipment $22,000; Debit Accumulated Depreciation $25,000; Credit Gain on Sale $3,000.
Explanation: The book value of the equipment was $30,000 - $25,000 = $5,000. It was sold for $8,000, resulting in a 3,000gain.Theoriginalincorrectentrypartiallydebitedcashandcreditedequipment.Thecorrectingentrymustcompletethetransaction.TheEquipmentaccountmustbecreditedfortheremainingamount(3,000 gain. The original incorrect entry partially debited cash and credited equipment. The correcting entry must complete the transaction. The Equipment account must be credited for the remaining amount (30,000 - $8,000 = $22,000) to remove it from the books. The Accumulated Depreciation account must be debited for $25,000 to remove its balance. Finally, the $3,000 Gain on Sale must be credited. The debit to cash is already correctly recorded.

Question 17

A company received $2,400 cash from a client for services performed. The transaction was recorded by debiting Cash for $240 and crediting Service Revenue for $240. Which entry will correct this slide error?

  1. Debit Cash $240; Credit Service Revenue $240.
  2. Debit Cash $2,400; Credit Service Revenue $2,400.
  3. Debit Service Revenue $240; Credit Cash $240, and Debit Cash $2,400; Credit Service Revenue $2,400.
  4. Debit Cash $2,160; Credit Service Revenue $2,160. (correct answer)
Explanation: The original entry understated both Cash and Service Revenue by 2,160(2,160 (2,400 - $240). The correcting entry must record the remaining amount that was omitted from the original entry. This is achieved by debiting Cash for $2,160 and crediting Service Revenue for $2,160, bringing the balances in both accounts to the correct total of $2,400.

Question 18

During the closing process, an accountant discovered that a $3,200 collection of accounts receivable was recorded as:

Dr. Cash $3,200 Cr. Service Revenue $3,200

What correcting entry should be made before closing the books?

  1. Dr. Accounts Receivable $3,200; Cr. Service Revenue $3,200
  2. Dr. Service Revenue $3,200; Cr. Accounts Receivable $3,200 (correct answer)
  3. Dr. Accounts Receivable $3,200; Cr. Cash $3,200; Dr. Cash $3,200; Cr. Service Revenue $3,200
  4. Dr. Accounts Receivable $3,200; Cr. Cash $3,200
Explanation: The original entry incorrectly recorded collection of receivables as new revenue. The cash debit was correct, but the credit should have been to Accounts Receivable, not Service Revenue. The correcting entry removes the erroneous revenue credit and properly credits (reduces) Accounts Receivable. Choice A would increase both receivables and revenue incorrectly. Choice C unnecessarily reverses the entire entry. Choice D would eliminate the cash received.

Question 19

A company's accountant recorded the purchase of equipment for $15,000 with a $3,000 down payment and a note payable for the balance as follows:

Dr. Equipment $12,000 Cr. Cash $3,000 Cr. Notes Payable $12,000

What correcting entry is needed to fix this error?

  1. Dr. Equipment $3,000; Cr. Notes Payable $3,000 (correct answer)
  2. Dr. Notes Payable $3,000; Cr. Equipment $3,000
  3. Dr. Equipment $15,000; Cr. Cash $3,000; Cr. Notes Payable $12,000
  4. Dr. Cash $3,000; Cr. Notes Payable $3,000; Dr. Equipment $3,000; Cr. Cash $3,000
Explanation: The original entry understated Equipment by $3,000 (recorded $12,000 instead of $15,000) and overstated Notes Payable by $3,000 (recorded $12,000 instead of $9,000). The correcting entry increases Equipment by $3,000 and decreases Notes Payable by $3,000. Choice B would worsen both errors. Choice C attempts to re-record the entire transaction but doesn't address the original error. Choice D unnecessarily complicates the correction with offsetting cash entries.

Question 20

A clerk recorded a $1,200 utility bill received but not yet paid with this entry:

Dr. Utilities Expense $1,200 Cr. Utilities Payable $1,200

Two days later, the bill was paid and recorded as:

Dr. Utilities Expense $1,200 Cr. Cash $1,200

What correcting entry should be made after discovering this error?

  1. Dr. Utilities Payable $1,200; Cr. Cash $1,200
  2. Dr. Cash $1,200; Cr. Utilities Expense $1,200
  3. Dr. Utilities Payable $1,200; Cr. Utilities Expense $1,200 (correct answer)
  4. Dr. Utilities Payable $1,200; Cr. Utilities Expense $1,200; Dr. Utilities Expense $1,200; Cr. Cash $1,200
Explanation: When dealing with accounting errors involving multiple entries, you need to analyze what happened versus what should have happened, then determine what entry will fix the accounts. Let's trace through this error. The first entry correctly recorded the utility bill: Dr. Utilities Expense $1,200, Cr. Utilities Payable $1,200. This properly shows the expense incurred and the liability owed. However, when paying the bill, the clerk incorrectly debited Utilities Expense again instead of debiting Utilities Payable. This means Utilities Expense is now overstated by $1,200 (recorded twice instead of once), and Utilities Payable still shows a $1,200 balance even though the bill was paid. The correcting entry must reduce Utilities Expense by $1,200 and eliminate the Utilities Payable balance. This requires Dr. Utilities Payable $1,200; Cr. Utilities Expense $1,200, which is answer C. Answer A (Dr. Utilities Payable $1,200; Cr. Cash $1,200) would eliminate the payable but doesn't fix the overstated expense, and it incorrectly increases cash when cash was already properly reduced in the payment entry. Answer B (Dr. Cash $1,200; Cr. Utilities Expense $1,200) fixes the overstated expense but doesn't eliminate the payable, and incorrectly suggests cash should be increased. Answer D shows a complex compound entry that would actually reverse and redo both transactions, which is unnecessarily complicated and doesn't achieve the goal efficiently. Remember: when correcting errors, identify which accounts are misstated, then craft an entry that brings each account to its proper balance.