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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Indicate whether the following items in a bank reconciliation should be (1) added to the Cash account balance, (2) deducted from the Cash account balance, (3) added to the bank statement balance, or (4) deducted from the bank statement balance.

  1. a. NSF check
  2. b. Deposit in transit
  3. c. Outstanding check
  4. d. Bank error charging the business’s account with another company’s check
  5. e. Bank service charge

To determine

Identify the bank reconciliation items as per the given classification: (1), (2), (3), and (4).

Explanation

Bank Reconciliation Statement: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

The bank reconciliation items are classified as (1), (2), (3), and (4) as shown below:

Bank Reconciliation ItemsClassification
a.(2)Deducted from the Cash account balance
b.(3)Added to the bank statement balance
c.(4)Deducted from the bank statement balance
d.(3)Added to the bank statement balance
e.(2)Deducted from the Cash account balance

Table (1)

Description for the bank reconciliation items:

  1. a. While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds...

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