Question

What is the first step when rectifying a wrongly recorded transaction according to the standard formula?

Options

• Rewrite the correct entry

• Calculate the profit or loss

• Reverse (cancel) the wrong entry

• Close the suspense account

Answer 1

Reverse (cancel) the wrong entry

Explanation:

According to the rectifying entry formula, first, the wrong effect is reversed (cancelled), and then the correct effect is recorded in the accounts.