Response to the following problem:
Determine the effect of the following errors on a company's total revenue, total expenses, and net income. Indicate the effect by writing O for Overstated (too much), U for Understated (too little), or NA for Not Affected.
Transactions Total Revenue Total Expenses Net Income
NA 0 U
Example: A check for $325 was written to pay on account. The accountant debited Rent Expense for $325 and credited Cash for $325
a. $420 was received on account from customers. The accountant debited Cash for $420 and credited Professional Fees for $420.
b. The owner withdrew $1,200 for personal use. The accountant debited Wages Expense for $1,200 and credited Cash for $1,200.
c. A check was written for $1,250 to pay the rent. The accountant debited Rent Expense for $1,520 and credited Cash for $1,520.
Transactions Total Revenue Total Expenses Net Income
d. $1,800 was received on account from customers. The accountant debited Cash for $1,800 and credited the Capital account for $1,800.
e. A check was written for $225 to pay the phone bill received and recorded earlier in the month. The accountant debited Phone Expense for $225 and credited Cash for $225.