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

Which of the following items should be subtracted from the book balance during the preparation of a bank reconciliation statement?

Deposits in transit

Bank service charges

Interest earned on the bank account

Outstanding checks

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Verified step by step guidance

Understand the purpose of a bank reconciliation statement: It is used to reconcile the differences between the bank statement balance and the company's book balance by identifying items that cause discrepancies.

Identify the items listed in the problem and classify them based on their impact on the book balance: Deposits in transit, Bank service charges, Interest earned on the bank account, and Outstanding checks.

Recognize that deposits in transit are amounts recorded in the company's books but not yet reflected in the bank statement. These are added to the bank balance during reconciliation, not subtracted from the book balance.

Understand that bank service charges are fees deducted by the bank from the account. These charges reduce the book balance and should be subtracted during reconciliation.

Note that interest earned on the bank account increases the book balance and should be added, while outstanding checks are payments issued by the company but not yet cleared by the bank. Outstanding checks reduce the bank balance but do not directly affect the book balance during reconciliation.