If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement?
a. The company must increase the balance per its records by $500.
b. The company must decrease the balance per its records by $500.
c. The company must increase the balance per its records by $450.
d. The company must decrease the balance per its records by $450.
The company must increase the balance per its records by $450.
b. The company must decrease the balance per its records by $500.
To determine the correct answer to this question, let's first understand the process of reconciling a bank statement.
When reconciling a bank statement, you start by comparing the transactions on the bank statement with the transactions in the company's records. The goal is to identify any discrepancies between the two and then make adjustments to ensure the balances match.
In this scenario, the company erroneously recorded a $500 deposit as $50. This means that there is a discrepancy between the bank statement and the company's records. To reconcile this error, the company needs to make an adjustment.
The correct adjustment would be to increase the balance per its records by $450.
Explanation:
- The bank statement shows a $500 deposit.
- The company's records incorrectly show a $50 deposit.
- The difference between the two is $450 ($500 - $50).
Therefore, option c. The company must increase the balance per its records by $450 is the correct answer.