Question

Rice Corp noticed that a check written by the company for utility expenses in the amount of 1,000 was incorrectly recorded by the bank at 1,100. What is the journal entry required to correct this error?

Answer 1

To correct the recording error by the bank, Rice Corp needs to debit its utility expenses account by $100 and credit its cash account by the same amount.

Step-by-step explanation:

The journal entry required to correct the error where Rice Corp's check was incorrectly recorded by the bank as $1,100 instead of $1,000 involves adjusting the company's cash account and the utility expenses account. Since the bank deducted $100 too much, the company's cash account actually has $100 more than what the bank records show. To correct this, the company needs to debit the utility expenses for $100 to reflect the true expense and credit the cash account to show the actual available cash.

The journal entry would be:

• 
  
• Debit Utility Expenses: $100
• 
  
• Credit Cash: $100

In real-world scenarios, like the one where Noel caught a $250,000 overpayment error, vigilance in reviewing financial documents can prevent significant financial loss. Prompt communication with the accounting department, like Noel did, is crucial to resolving such issues efficiently.