Question

In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $790, but was erroneously entered in the accounting records as $970. The journal entry to adjust the books for the bank reconciliation would include which of the following for this situation?
a. $180 decrease to Cash and a $180 decrease to Utility Expense
b. $180 increase to Cash and a $180 decrease to Utility Expense
c. $20 decrease to Cash and a $20 decrease to Utility Expense
d. $20 increase to Cash and a $120 decrease to Utility Expense
e. $970 increase to Cash.

Answer 1

Answer:

b. $180 increase to Cash and a $180 decrease to Utility Expense

Explanation:

Since it is given that the correct amount for utilities is $790 and it is wrongly entered as a $970 that means utility expense is excess debited for $180

So to adjust the bank reconciliation the journal entry is

Cash $180

    To Utilities  $180

(being the adjusted entry is recorded)

The $180 is come from

= $970 - $790

= $180

So it increased the cash and decreased the expenses so the recording is done accordingly