A check drawn by a depositor for $915 in payment of a liability was recorded in the depositor's book as $195.What adjustment is required in the depositor's accounts?

Question

Quizplus · Accepted Answer

The recorded amount in the depositor's book is less than the actual amount of the check. Therefore, it means that the actual decrease in the liability is higher than what has been recorded. To correct this, we need to decrease the Accounts Payable (liability) by the actual amount of the check ($915) and decrease Cash (asset) by the recorded amount ($195). This will bring the accounts in line with the actual transaction.

A Check Drawn by a Depositor for $915 in Payment