Multiple Choice
Which of the following individuals has correctly balanced their checkbook after receiving a bank statement showing a \$50 service charge and \$200 in outstanding deposits?
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6. Internal Controls and Reporting Cash
Bank Reconciliation
Multiple Choice
Which of the following items must be adjusted to the book balance during the bank reconciliation process?
A
Deposits in transit
B
Errors made by the bank
C
Outstanding checks
D
Bank service charges
Verified step by step guidance1
Understand the concept of bank reconciliation: Bank reconciliation is the process of comparing the bank statement balance with the company's book balance to identify discrepancies and ensure accuracy in financial records.
Identify the items that affect the book balance: Items that must be adjusted to the book balance are those that the company has not yet recorded but are reflected in the bank statement. Examples include bank service charges, interest income, and NSF (non-sufficient funds) checks.
Analyze the given options: Deposits in transit and outstanding checks are timing differences that affect the bank balance, not the book balance. Errors made by the bank are adjustments to the bank balance, not the book balance.
Focus on bank service charges: Bank service charges are fees deducted by the bank that the company may not have recorded yet. These charges must be adjusted to the book balance during the reconciliation process.
Conclude the adjustment process: To reconcile the book balance, add or subtract items like bank service charges, interest income, and NSF checks to ensure the book balance matches the adjusted bank balance.
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