Answer to Question #266334 in Accounting for nicole

Question

5.Which of the following items must be deducted from the bank statement balance in preparing a bank reconciliation which ends with adjusted cash balance?

A. Deposit in transit

B. Outstanding check

C. reduction of loan charged to the account of the depositor

D. certified check

6.Provide 1-2 sentence/s to explain your answer in item number 5.

7.In preparing a monthly bank reconciliation, which of the following items would be added to the balance per bank statement to arrive at the correct cash balance?

A. Outstanding checks

B. Bank service charge

C. Deposit in transit

D. A customer’s note collected by the bank on behalf of the depositor

8.Provide 1-2 sentence/s to explain your answer in item number 7.

9.When preparing a bank reconciliation, bank credits are

A. Added to the bank statement balance

B. Deducted from the bank statement balance

C. Added to the balance per book

D. Deducted from the balance per book

10.Provide 1-2 sentence/s to explain your answer in item number 9.

Answer 1

5 and 6

Deduct outstanding checks because they cause an overstatement in the bank statement balance. Since they been already recorded in the book accounts as cash disbursements, they should therefore be subtracted from the bank statement balance.

7 and 8

Add deposit in transit because it is the currency and checks of the customers that have been received and reported rightfully as cash on the date they were received. Therefore, should be added to the balance per bank statement so as to arrive at the correct cash balance.

9 and10

Bank credits will be added per book balance because they have been debited from the bank accounts and issued to the borrowers.