What amounts would be added to the bank statement balance during reconciliation?

What amounts would be added to the bank statement balance during reconciliation?

• A. Outstanding checks
• B. Bank service charges
• C. Interest earned
• D. Deposits in transit

Answer: (D)

In bank reconciliation, you adjust the bank balance for timing differences between what the company has recorded and what the bank has posted. Deposits in transit are cash receipts the company has already recorded but the bank hasn’t processed yet. Because the bank will eventually post these deposits, you add their amounts to the bank statement balance to align it with the company’s cash balance. Outstanding checks—checks issued by the company that haven’t cleared yet—would reduce the bank balance when the bank finally processes them, so they’re subtracted in reconciliation. Bank service charges and interest earned affect the book side (or are handled as separate adjustments between the bank’s records and the company’s books), so they aren’t added to the bank balance during reconciliation.

In bank reconciliation, you adjust the bank balance for timing differences between what the company has recorded and what the bank has posted. Deposits in transit are cash receipts the company has already recorded but the bank hasn’t processed yet. Because the bank will eventually post these deposits, you add their amounts to the bank statement balance to align it with the company’s cash balance.

Outstanding checks—checks issued by the company that haven’t cleared yet—would reduce the bank balance when the bank finally processes them, so they’re subtracted in reconciliation. Bank service charges and interest earned affect the book side (or are handled as separate adjustments between the bank’s records and the company’s books), so they aren’t added to the bank balance during reconciliation.