Adjusting Journal Entries for Current Year Purchases
Lesson:
Sometimes auditors find mistakes that need to be corrected, either because of fraud or mistakes by the original accounting team.
When credit purchases for inventory is underreported:
- Debit inventory
- Credit accounts payable
- Debit accounts payable
- Credit inventory
You're an accountant trying to implement the recommendations made by an external auditor.
Here are the relevant facts:
- The highlighted purchase was for a known quantity of inventory.
- The error occurred in the current year's records.
- An auditor reported that the accounts payable account had been over reported by $72.00.
What journal entry or journal entries should be made?
Answer:
-
Accounts payable $72.00 Inventory $72.00