What might indicate a transposition error in accounting?

What might indicate a transposition error in accounting?

• A. A difference of $540 in totals
• B. Cash account showing a credit balance
• C. Accounts Payable in the wrong column
• D. Allowance for Doubtful Accounts with zero balance

Answer: (A)

A transposition error occurs when two digits are swapped in a number, which can lead to discrepancies in financial statements. A difference of $540 in totals is a strong indicator of such an error. This specific amount could suggest that a number was incorrectly entered, leading to a calculation discrepancy. Transposition errors often result in differences that are multiples of 9, and $540 can indeed be broken down in a way that suggests a swapping of digits may have occurred. The other options do not specifically indicate a transposition error. While a cash account showing a credit balance might hint at an accounting issue, it does not specifically point to a transposition error. Similarly, having Accounts Payable in the wrong column could indicate misclassification or entry error but not necessarily a transposition error directly. Lastly, an Allowance for Doubtful Accounts with a zero balance may reflect poor estimates or lack of transactions, rather than a transposition of numbers. Thus, the significance of the $540 discrepancy makes it the most reliable indicator of a potential transposition error.

A transposition error occurs when two digits are swapped in a number, which can lead to discrepancies in financial statements. A difference of $540 in totals is a strong indicator of such an error. This specific amount could suggest that a number was incorrectly entered, leading to a calculation discrepancy. Transposition errors often result in differences that are multiples of 9, and $540 can indeed be broken down in a way that suggests a swapping of digits may have occurred.

The other options do not specifically indicate a transposition error. While a cash account showing a credit balance might hint at an accounting issue, it does not specifically point to a transposition error. Similarly, having Accounts Payable in the wrong column could indicate misclassification or entry error but not necessarily a transposition error directly. Lastly, an Allowance for Doubtful Accounts with a zero balance may reflect poor estimates or lack of transactions, rather than a transposition of numbers. Thus, the significance of the $540 discrepancy makes it the most reliable indicator of a potential transposition error.