Multiple Choice
Which document is primarily used to validate the bank and credit card account balances reported on a company's balance sheet?
102
views
6. Internal Controls and Reporting Cash
Bank Reconciliation
Multiple Choice
Given the following information to reconcile Branch Company's bank account, which of the following items should be added to the company's book balance during the bank reconciliation process?
A
Collections made by the bank on behalf of the company
B
Bank service charges
C
Deposits in transit
D
Outstanding checks
Verified step by step guidance1
Understand the purpose of a bank reconciliation: It is a process to ensure that the company's book balance matches the bank statement balance by accounting for timing differences and errors.
Identify the items provided in the problem: Collections made by the bank on behalf of the company, bank service charges, deposits in transit, and outstanding checks.
Determine the impact of each item on the company's book balance: Collections made by the bank increase the book balance, bank service charges decrease the book balance, deposits in transit do not affect the book balance (they are added to the bank balance), and outstanding checks do not affect the book balance (they are subtracted from the bank balance).
Focus on the item that should be added to the company's book balance: Collections made by the bank on behalf of the company represent cash inflows that the company has not yet recorded in its books, so this item should be added to the book balance.
Conclude that during the bank reconciliation process, collections made by the bank on behalf of the company are the item that should be added to the company's book balance.
Related Videos
Related Practice
