Which of the following items on a bank reconciliation would require an adjusting entry on the company’s books? Group of answer choices An outstanding deposit Outstanding cheques An error by the bank A bank service charge
Question
Which of the following items on a bank reconciliation would require an adjusting entry on the company’s books? Group of answer choices
An outstanding deposit
Outstanding cheques
An error by the bank
A bank service charge
Solution
A bank service charge would require an adjusting entry on the company’s books. Here's why:
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An outstanding deposit: This is an amount that has been recorded in the company's books but has not yet been recorded by the bank. It does not require an adjusting entry because it is expected to be cleared and reflected in the bank statement at a later date.
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Outstanding cheques: These are cheques that the company has issued and recorded in its books but have not yet been cleared by the bank. Like outstanding deposits, they do not require an adjusting entry because they are expected to be cleared and reflected in the bank statement at a later date.
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An error by the bank: This is a mistake made by the bank in recording the company's transactions. It does not require an adjusting entry on the company's books because it is the bank's responsibility to correct the error.
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A bank service charge: This is a fee charged by the bank for its services. It requires an adjusting entry because it decreases the company's bank balance. The company needs to record this charge in its books to accurately reflect its financial position.
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