The accountant of Leo Ltd. recorded a payment by cheque to a creditor for supply of materials as 1,340.56. The bank recorded the cheque at its correct amount of 3,140.56. The Company has not passed any rectification entries and the error is not detected through the bank reconciliation. The impact of this error is?

A. The Trial Balance will not agree
B. The balance of creditors is understated
C. The purchases are understated
D. The favorable bank balance as per Pass Book is less than the Bank balance as per Cash book

Right Answer: The favorable bank balance as per Pass Book is less than the Bank balance as per Cash book

February 22, 2018   Asghar Khan    Accounting  
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