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Homework answers / question archive / Assume that Timberline Consulting erroneously recorded the payment of $9,000 of dividends as a debit to Salary Expense
Assume that Timberline Consulting erroneously recorded the payment of $9,000 of dividends as a debit to Salary Expense.
(a) How would this error affect the equality of the trial balance?
(b) How would this error affect the income statement, retained earnings statement, and balance sheet?
a)The equality of the trial balance would not be affected.
b)On the income statement, total operating expenses (salary expense) would be overstated by $9,000, and net income would be understated by $9,000. On the retained earnings statement, the be-ginning and ending retained earnings would be correct. However, net income and dividends would be understated by $9,000. These understatements offset one another, and, thus, ending retained earnings is correct. The balance sheet is not affected by the error.
