Question

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?

Answer 1

Answer:

To correct this, a debit entry of $27 is posted in the books.

Explanation:

Amount of check written and paid = $514

Amount recorded in the company's books = $541

Excess recognized in the books = $541 - $514

                                                      = $27

The check written and paid by the bank is recorded as a credit entry in the books. Hence the book has been over-credited with difference.

To correct this, a debit entry of $27 is posted in the books. The corresponding credit goes to the account that was initially debited when the entry of $541 was posted.

Answer 2

In the bank reconciliation they will need to add the difference to the company’s cash balance.  They subtracted too much (541-514 = $27 difference) from their cash balance.  They need to add $27 to their cash balance so that it will be correct and balance with the bank.