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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Which of these is subtracted from the ending book balance?

  1. (a) Deposits in transit
  2. (b) Service charges
  3. (c) Note collection
  4. (d) Bank errors

To determine

Identify the option that can be subtracted from the ending book balance.

Explanation

Bank reconciliation:

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.

Justification for the incorrect answer:

Option a:

Deposit in transit is the amount that is deposited in the bank account by the depositor while preparing the ending balance as per bank; the deposit in transit is not recorded by the company while preparing the ending book balance. Therefore, Option a is an incorrect answer.

Option c:

Note collection is a fee collected from bank for the deposit made in the bank, it is a credit memo and it is added to the ending cash balance per cash book. Therefore, Option c is an incorrect answer.

Option d:

Bank errors made by the bank on cash transaction are added to the ending cash balance per cash book...

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