A contractor discovers that a subcontractor's invoice for $15,000 was recorded twice in accounts payable. What is the correct journal entry to fix this error?
Correct Answer
C) Debit Accounts Payable $15,000, Credit Expenses $15,000
To correct the duplicate entry, debit Accounts Payable to reduce the liability and credit the expense account that was overstated, both for $15,000.
Why This Is the Correct Answer
When an invoice is recorded twice, both the accounts payable liability and the expense are overstated by $15,000. To correct this error, you must reduce (debit) the accounts payable to eliminate the duplicate liability and reduce (credit) the expense account that was incorrectly inflated. This journal entry reverses exactly half of what was incorrectly recorded, bringing both accounts back to their proper balances.
Why the Other Options Are Wrong
Option A: Debit Accounts Payable $15,000, Credit Cash $15,000
This entry increases cash and reduces accounts payable, which would be appropriate for recording an actual payment to the subcontractor, not for correcting a duplicate recording error
Option B: Debit Cash $15,000, Credit Accounts Payable $15,000
This entry increases expenses (which are already overstated) and reduces accounts payable, making the expense overstatement even worse rather than correcting it
Memory Technique
Think 'DARE' - Debit Accounts payable, Reverse the Error. When you duplicate an entry, you must reverse one complete recording (both the liability AND the expense)
Reference Hint
Business and Finance chapter covering accounting principles and journal entries, specifically the section on correcting entries and accounts payable
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