Adjusting the trial balance
Could someone clarify why cash is recorded as a debit of 18,750?
The current trial balance shows cash debited at 20,350.
Since the question indicates it was overstated by 7,000, shouldn’t I simply deduct 7,000 from 20,350?
One response
In order to fix the trial balance, you’ll want to take into account the original cash balance and the amount by which it was overstated.
The trial balance currently shows cash debited at 20,350, and you’ve identified that this amount is overstated by 7,000. To correct the overstatement, you would indeed subtract the overstatement from the current balance:
20,350 (current cash balance) – 7,000 (overstatement) = 13,350
However, the question states that the corrected cash amount should be 18,750. This means that there might be an additional factor you need to consider.
If we take your original cash balance of 20,350 and subtract the overstatement of 7,000, you’d end up with 13,350. In order to reach a corrected balance of 18,750, it suggests that there is an additional 5,400 that needs to be added or there was a further issue with the cash account.
To clarify:
So you may need to look into why those additional funds or adjustments are required to arrive at the correct figure of 18,750. It’s important to review any other transactions or adjustments related to cash that could affect this correction.