Question

A company checks written for $600 for rent expense cleared the bank correctly but the company accountant incorrectly recorded the check for $60.
The journal entry to correct this error would be:

a. debit cash, $540; credit rent expense, $540

b. debit rent expense, $600; credit cash, $600

c. no journal entry required

d. debit rent expense, $540; credit cash $540

Answer 1

Answer:

Option D,debit rent expense, $540; credit cash $540

Explanation:

To start with, it is important to note that the check of $600 has correct posting in the bank account,hence that requires no adjustment.

However, on the cash book side, a lesser amount has been credited as outflow of cash to the tune of $540($600-$60),hence the correct entry would be record the balancing cash flow by crediting cash book and debiting the rent expense account,hence option D appropriately captured that correct entry.