Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Bank Reconciliation

Financial Accounting

6. Internal Controls and Reporting Cash

Bank Reconciliation

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Multiple Choice

On a bank reconciliation, which of the following items would be subtracted from the bank statement balance to arrive at the adjusted bank balance?

Interest earned

Deposits in transit

Bank service charges

Outstanding checks

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Verified step by step guidance

Understand the purpose of a bank reconciliation: It is a process used to match the bank statement balance with the company's cash account balance, identifying any discrepancies and ensuring accuracy.

Identify the items that affect the bank statement balance: These include outstanding checks, deposits in transit, bank service charges, and interest earned. Each item impacts the reconciliation differently.

Focus on outstanding checks: Outstanding checks are payments issued by the company that have not yet cleared the bank. These reduce the bank statement balance because the bank has not yet processed them.

Determine the adjustment: To arrive at the adjusted bank balance, subtract the total amount of outstanding checks from the bank statement balance. This reflects the reduction in available funds due to these pending payments.

Exclude other items: Interest earned and deposits in transit increase the bank balance, while bank service charges reduce the company's book balance, not the bank statement balance. Therefore, only outstanding checks are subtracted from the bank statement balance.