While performing its monthly bank reconciliation, the bookkeeper for the 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 the correcting entry on the financial statements?

Question

Quizplus · Accepted Answer

The error understated cash and overstated accounts receivable. Therefore, the entry to correct the error will increase cash (an asset) and decrease accounts receivable (an asset). It will also be reported as a cash inflow for operating activities.

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