what is the journal entry of cash received from a customer on account was recorded(both debit and credit) as birr 1400 instead of birr 1120
To correct the journal entry for cash received from a customer on account, you will need to make a correcting entry to rectify the error. Here's what the correct journal entry would look like:
Debit: Accounts Receivable - Customer's Name (original amount: birr 1400, correct amount: birr 1120)
Credit: Cash (original amount: birr 1400, correct amount: birr 1120)
Credit: Sales Revenue (birr 280, which is the difference between the original and correct amounts)
Explanation:
1. Debit: Accounts Receivable - Customer's Name:
- Decrease the accounts receivable by the difference between the original and correct amounts (birr 1400 - birr 1120 = birr 280). This corrects the overstatement of accounts receivable initially recorded.
2. Credit: Cash:
- Decrease the cash account by the difference between the original and correct amounts (birr 1400 - birr 1120 = birr 280). This reflects the actual cash received.
3. Credit: Sales Revenue:
- Decrease the sales revenue by the difference between the original and correct amounts (birr 1400 - birr 1120 = birr 280). This records the adjustment for the incorrect revenue initially recognized.
By making this correcting entry, you are adjusting the accounts receivable balance, ensuring the cash account is accurately reflected, and adjusting the revenue recognition for the overstatement.