In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for a cheque for $952 in payment of a supplier's account that was erroneously entered as $592 in the company's books is to:
A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question

Quizplus · Accepted Answer

The cheque for $952 was erroneously entered as $592 in the company's books means that the company recorded $360 less than the actual amount that was paid to the supplier. Therefore, the appropriate treatment for this error is to deduct it from the balance per company records. This is because the company has recorded less than the actual amount, which means that the company's cash balance is overstated by $360. Deducting this amount from the company's records will give the correct cash balance.

In Preparing a Bank Reconciliation Statement for a Business with a Substantial