Question

A check payment for $658 was incorrectly entered in the Cash account as $856. Which of the following adjustments needs to be made? A) decrease the book balance B) increase the book balance C) increase the bank statement balance D) decrease the bank statement balance

Answer 1

Answer:

B) increase the book balance

Explanation:

Provided that total actual payment = $658

Recorded value of this transaction in cash book for payment = $856

Difference of amount that is wrongly recorded = $856 - $658 = $198

That means as per cash book the balance is less by this amount as it relates to payments.

For this the balance in cash book for cash receipts is to be increased.

No adjustment can be made in bank statement it is system generated, and the wrong amount is also entered in cash account, that is cash book.

Therefore, correct option is

B) increase the book balance