What is the correcting entry for the lawyer's erroneous debit and credit entries?
The correcting entry for the lawyer's erroneous debit and credit entries in the collection of legal fees is as follows:
Cash 360, Accounts Receivable 370, and Unearned Service Revenue 730. The correct option is C.
Understanding the Correcting Entry for Erroneous Debit and Credit Entries
A lawyer collected $730 of legal fees in advance. he erroneously debited cash for $370 and credited accounts receivable for $370. the correcting entry is
The lawyer received $730 of legal fees in advance but mistakenly recorded a debit entry of only $370 to the cash account and a credit entry of $370 to the accounts receivable account. This error caused the lawyer to understate the cash account balance and overstate the accounts receivable balance, resulting in an incorrect financial statement.
To correct this error, the lawyer should debit the cash account for the remaining $360 and credit the accounts receivable account for the correct amount of $370. Additionally, the lawyer should credit the unearned service revenue account for the total amount of $730, as the legal services have not yet been performed.
In summary, the correcting entry for the lawyer's erroneous debit and credit entries involves debiting the cash account for the remaining amount, crediting the accounts receivable account for the correct amount, and crediting the unearned service revenue account for the total amount of legal fees collected in advance.