Answer to Question #279481 in Accounting for Another you

Question #279481

1. Company X wrote a check for 9,500.00 payable to Andrew Reyes and it cleared with the bank for the same amount. The accounting book of the company however shows that the same check issued to Mr. Reyes was recorded as 5,900.00. What is the effect of this entry to the bank or book balance? What will you do to reconcile the book and bank balances?


1
Expert's answer
2021-12-15T11:35:25-0500

Solution:

This error is known as a transposition error which would create an imbalance between the book and bank balances. This is because it will display an undercharge in the books of account.

Undercharge in the books = 9,500 – 5,900 = 3,600

The initial journal entry in the books were as follows:

Dr. Accounts payable (Andrew Reyes) A/c      5,900

                Cr. Bank A/c                                                                 5,900

 

In order to reconcile the book and bank balances, a journal entry for the undercharge will be created to balance the books as follows:

Dr. Accounts payable (Andrew Reyes) A/c      3,600

                Cr. Bank A/c                                                                 3,600

(To correct payment to Reyes undercharge)

Once this journal entry is made, the accounts will balance.


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS