O Level Accounting (7707)•7707/12/M/J/20
Explanation
Correcting Misrecorded Asset Sale
Steps:
- Identify error: $1000 cash from fixture sale wrongly credited to Sales account via sales journal.
- Proper recording: Debit Bank for cash; credit Fixtures to remove asset (or recognize gain, but simplified here).
- Correction needed: Reverse Sales credit by debiting Sales; credit Fixtures instead.
- Journal entry: Debit Sales 1000.
Why C is correct:
- Reverses erroneous Sales credit (per double-entry principle) and properly reduces Fixtures asset for disposal.
Why the others are wrong:
- A: Incomplete entry lacks credit side, violating double-entry rule.
- B: Records cash against "disposal of fixtures" (non-standard account) without reversing Sales error.
- D: Credits "disposal of fixtures" instead of Fixtures, failing to adjust the actual asset account.
Final answer: C
Topic: Correction of errors
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