While performing its monthly bank reconciliation,the bookkeeper for Grace Corporation noted that a deposit of $990 (received from a customer on account) was recorded in the company books as $900.Which of the following shows the effect of correcting the error on the financial statements?

Question

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Here, cash was understated by $90, which is the difference between the actual amount of the receipt of $990 and the amount recorded of $900, and accounts receivable was overstated by the same amount. Correcting this error will increase assets (cash) and decrease assets (accounts receivable); thus, total assets do not change. The $90 increase to cash is reported as a cash inflow for operating activities.

While Performing Its Monthly Bank Reconciliation,the Bookkeeper for Grace Corporation