O Level Accounting (7707)•7707/12/O/N/22
Explanation
Correcting over-recorded credit transfer with proper double entry Steps:
- Identify the error: Actual credit transfer of 86, overstating both bank and insurance by $18.
- Calculate adjustment: Difference is 18 less and insurance $18 less, but full correct entry replaces it.
Why A is correct:
- Matches the definition of double-entry bookkeeping for receipts: Debit asset (bank) and credit related account (insurance) for the true $68 amount, aligning records with actual transaction.
Why the others are wrong:
- B: Debits insurance (expense/receivable increase) and credits bank, reversing payment logic for a credit transfer receipt.
- C: Uses $18 difference but debits insurance and credits bank, worsening the overstatement instead of correcting via full accurate entry.
- D: Same as B, incorrectly treating it as expense payment rather than receipt.
Final answer: A
Topic: Correction of errors
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