If a check correctly written and paid by the bank for $514 is incorrectly recorded in...

If a check correctly written and paid by the bank for $514 is incorrectly recorded in the company's books for $541, how should this error be treated on the bank reconciliation?

Multiple Choice

Subtract $27 from the bank's balance.

Subtract $27 from the book balance.

Add $27 to the bank's balance.

Subtract $27 from the bank's balance and add $45 to the book's balance.

Add $27 to the book balance.

Solutions

Expert Solution

B. Subtract 27$ from book balance.

AS it is clearly stated therein Bank is showing correct balance ( Assumed from Bank Balance is correct entered and paid off) it means rectification is made only in books of account. Where 541$ is mistakenly written instead of 514$ and difference is 27$ recorded higher as compared to bank statement.

Subtract $27 from the bank's balance- Wrong Option, because it will further reduce the bank balance, where bank is correctly entered. .

Subtract $27 from the book balance.- Correct Option ( Reason stated in the Begining)

Add $27 to the bank's balance.- Wrong Option, As per instrument 514 $ addition will have no documentary proof, leads to fraudulent activity. -

Subtract $27 from the bank's balance and add $45 to the book's balance.- Wrong Option as reducing extra from bank and addtion of 45 to book, Reduction from bank is not correct option.

Add $27 to the book balance.- Wrong option, as further additon will not correct the wrong entry but only made it more complex.

ekkarill92 answered 2 years ago

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