Practice prompt · Q:transactions-to-statements/recording-error-correction-001

Correct a posting that reached the wrong account

Tests whether the learner writes a correction that moves only the misposted amount rather than reversing the whole entry.

Updated Aug 18, 2026 Review due Nov 18, 2026

Practice

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A 2,400 payment for a two-year insurance policy was recorded as a debit to Insurance Expense and a credit to Cash. The policy runs from the payment date forward, and the company records prepayments as assets.

A correcting entry should touch only what was wrong. Reversing an entire entry and rewriting it produces the same ending balances and a messier ledger, and it obscures which half of the original entry failed.

Choose the best answer. a Debit Prepaid Insurance 2,400 and credit Insurance Expense 2,400. b Debit Cash 2,400 and credit Insurance Expense 2,400, then record the entry again correctly. c Nothing, because total debits still equal total credits and the trial balance will balance. d Debit Prepaid Insurance 2,400 and credit Cash 2,400.

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Answer: a

Choice a. The credit to Cash was right, so the correction moves only the debit from Insurance Expense to Prepaid Insurance.