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B. Noncounterbalancing Errors
It makes no difference whether the books are closed or still open, a correcting journal entry is
necessary.
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DEBIT
100,000
10,000
CREDIT
80,000
30,000
To correct for error made in 2000 when the equipment was purchased and
expensed
Analysis of error:
Cost of equipment
Salvage value
Depreciable base
Service life
Annual deprecation
Years to December 31, 2001
Accumulated deprecation
Book value at December 31, 2001
Depreciation expense for 2002
Accumulated deprecation
100,000
10,000
90,000
9
10,000
2
20,000
100,000
20,000
80,000
10,000
30,000
If the 2002 books are closed the following journal entry would be made to correct the error made
in 2000.
DATE
ACCOUNT
DEBIT
CREDIT
12/31/02 Equipment
100,000
Retained earnings
70,000
Accumulated depreciation
30,000
To correct for error made in 2000 when the equipment was purchased and
expensed
Again, it is important to note that if comparative financial statements are prepared the correct
amounts for equipment, accumulated depreciation and depreciation expense are to be reported
for each year presented.
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