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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12044
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I work in a municipalities and we have a drive through where

Customer Question

I work in a municipalities and we have a drive through where citizens can pay their water bills.
Sometime we take a check for the numerical amount instead of the legal line written amount.
The following morning we usually be able to identify the difference during the bank deposit count, so we sent to the bank the deposit slip with the correct amount and we change the JE for the AR receivable that should be.
Is this process correct?
Submitted: 1 year ago.
Category: Finance
Expert:  LegalGems replied 1 year ago.

Thank you for your patience as I reviewed the codes.

Under UCC 3-114, written words prevail over numbers. So the deposit, to be in conformity with the UCC, would be for the written amount. The customer could be invoiced for any outstanding balance.

Here is the relevant code:

3-114. CONTRADICTORY TERMS OF INSTRUMENT.

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.

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Customer: replied 1 year ago.
Thank you for your answer, but my questions was about the process how to journalize the difference after we already record in the customer account the initial wrong amount.the day before.
Expert:  LegalGems replied 1 year ago.

I'm sorry; I thought it was about the legal issue of what amount should originally be deposited.

That is an accounting question so I will opt out so a business professional may assist you.

Expert:  JACUSTOMER-chxou16a- replied 1 year ago.

I will also opt out as I do not believe this is a legal question you are needing my advise. Good luck!

Expert:  Lane replied 1 year ago.

Hi, I can help here.

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Yes, you're right ... this is simply an adjusting entry. Maybe an example would help:

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On December 17, the company collected a receivable from a customer, $1,650.00. Suppose the bookkeeper recorded it at $1,560.00 instead of $1,650.00. This was theentry made:

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Dec17 Cash 1,560.00

Accounts Receivable 1,560.00

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What is the correct entry? The entry should have been:

Dec17 Cash 1,650.00

Accounts Receivable 1,650.00

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Cash is understated because the accountant recorded $1,560 instead of $1,650. Accounts Receivable is also overstated because it was reduced by $1,560 only but should have been reduced by $1,650.

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So, increase Cash and reduce Accounts Receivable by $90.

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The correcting entry would be:

Dec31 Cash 90.00

Accounts Receivable 90.00

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Another way of doing it (and an easier one) is to look at the entry made and correct entry. Upon analysis, you will see that the amount debited to Cash is less that what should have been debited. The same goes for the amount credited to Accounts Receivable.

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Cash should then be debited by $90 more and Accounts Receivable should be credited by $90 more. (THis may be closer to what you're actually doing ...(essentially just making an entry to bring the numbers to reflect what was deposited.

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Hope this has helped

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Lane

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Expert:  Lane replied 1 year ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

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Let me know…

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Thanks

Lane