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 into the accounting records as $970. The journal entry to adjust the books for the bank reconciliation would include a debit to:

a)Utility Expense and a credit to Cash for $180.
b)Cash and a credit to Utility Expense for $180.
c)Utility Expense and a credit to Cash for $790.
d)Cash and a credit to Utility Expense for $790.

Answer 1

To correct the discrepancy between the canceled check for $790 and the erroneously entered amount of $970, the adjustment entry would be a debit to Utility Expense and a credit to Cash for $180, reconciling the books with the bank statement.

Step-by-step explanation:

When comparing the canceled checks on the bank statement with the entries in the accounting records, the discrepancy identified indicates a need to adjust the accounting records for accuracy in financial reporting. In this scenario, check number 2889 was written for $790 for December's utilities but mistakenly entered into the records as $970. This error leads to a financial mismatch, affecting the cash balance and utility expenses reported.

To correct this error, the adjustment in the journal entry would involve a debit to Utility Expense and a credit to Cash for the difference amount, which is $180. This adjustment reduces over-reported utilities expense and increases the cash that was under-reported due to the incorrect entry.

The correct journal entry to adjust the books for the bank reconciliation is therefore: debit Utility Expense and credit Cash for $180. Option a) is correct, reflecting the precise amount necessary to amend the books so that they match the actual transaction value.