BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$49, 400.
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$50, 000.
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$50, 600.
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$65, 400.
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Detailed explanation-1: -Deposits in transit are deposits that were made after the bank statement was issued, but have been recorded on the books. Outstanding checks are checks that have been written and recorded on the books, but have not yet been cashed or have not cleared the bank.
Detailed explanation-2: -On the bank statement, compare the company’s list of issued checks and deposits to the checks shown on the statement to identify uncleared checks and deposits in transit. Using the cash balance shown on the bank statement, add back any deposits in transit.
Detailed explanation-3: -In the bank reconciliation process, the total amount of outstanding checks is subtracted from the ending balance on the bank statement when computing the adjusted balance per bank. (No adjustment is needed to the company’s general ledger accounts, since the outstanding checks were recorded when they were issued.)
Detailed explanation-4: -Example of Outstanding Checks The entry will debit Cash in order to increase the account balance. The credit portion of the entry will likely be to the account that was originally debited when the check was issued. The check that was voided is also removed from the list of outstanding checks.