The accountant of Leo Ltd. recorded a cheque payment to a creditor for materials as 1,340.56, whereas the bank recorded the correct amount of 3,140.56. No correction has been made and bank reconciliation has not detected the error. What is the effect of this error?
Correct answer D. The favourable bank balance as per Pass Book is less than the Bank balance as per Cash book
Explanation
The cash book shows a payment 1,800 lower than the bank deducted, so the cash book balance is overstated and the pass book balance is lower than it.
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