Skip to content

ACCA Applied Knowledge · Financial Accounting · Correction of errors

A business paid $450 for repairs to a machine and debited the amount to the machinery cost account. Which journal entry corrects this error?

Debit repairs expense $450 and credit machinery cost $450. The payment was wrongly capitalised as a non-current asset, so the asset is reduced and the expense recognised. No bank entry is needed because the cash payment was already recorded correctly.

  1. ADebit Repairs expense $450; credit Machinery cost $450Correct
  2. BDebit Machinery cost $450; credit Repairs expense $450
  3. CDebit Repairs expense $450; credit Bank $450
  4. DDebit Machinery cost $900; credit Repairs expense $900

Explanation

The repair cost should be an expense, but it was debited to machinery cost (an error of principle). To correct it, remove the debit from machinery by crediting $450 and debit repairs expense $450. Option B reverses the correction, and option C would record the payment a second time.

Did you get it right without looking?

One question tells you little. A timed set on Correction of errors shows your real accuracy, how long you take and where you lose marks.

Practise Correction of errorsFree diagnostic mock

More Correction of errors questions