In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for a cheque for $871 in payment of an account payable that was erroneously entered as $817 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 correct treatment is to deduct the difference from the balance per company records to correct the erroneous entry. The cheque was for $871 but was entered as $817, so the company's books show $54 less than what was actually paid. Correcting this error involves increasing the expenses by $54, effectively reducing the company's book balance to match the actual payment made.

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