current attempt in progress\nthe following reconciling items are applicable to the bank reconciliation for…
current attempt in progress\nthe following reconciling items are applicable to the bank reconciliation for forde co.\nindicate how each item should be shown on a bank reconciliation.\na. outstanding checks.\nb. bank debit memorandum for service charge.\nc. bank credit memorandum for collecting from customer an electronic funds\ntransfer.\nd. deposit in transit.
Answer
Brief Explanations:
- Outstanding checks: These are checks issued by the company but not yet cleared by the bank. Since the bank has not deducted these amounts from the account yet (while the company has already recorded the deduction in its books), they are subtracted from the bank balance on the bank reconciliation.
- Bank debit memorandum for service charge: This is a charge by the bank (like a fee for account maintenance). The company has not yet recorded this expense (as it comes from the bank). So, it is subtracted from the book balance on the bank reconciliation.
- Bank credit memorandum for collecting from customer an electronic funds transfer: This is money collected by the bank on behalf of the company (e.g., a customer paid directly to the bank via EFT). The company has not yet recorded this receipt. So, it is added to the book balance on the bank reconciliation.
- Deposit in transit: These are deposits made by the company but not yet recorded by the bank. Since the company has already recorded the deposit in its books (but the bank hasn't), they are added to the bank balance on the bank reconciliation.
Answer:
a. Subtract from bank balance. b. Subtract from book balance. c. Add to book balance. d. Add to bank balance.