In reconciling a bank statement, the bank statement balance is $1,000 and the balance per books is $1,205. A bank service charge is $5; a deposit in transit totals $500, and outstanding checks total $300. The adjusted bank balance and book balance is

Question

Quizplus · Accepted Answer

To adjust the bank balance, we need to add the deposit in transit and subtract outstanding checks and the bank service charge. 
Adjusted Bank balance = $1,000 + $500 - $300 - $5 = $1,195

To adjust the book balance, we only need to add the deposit in transit. 
Adjusted Book balance = $1,205 + $500 = $1,705

However, we need to compare the adjusted bank balance and adjusted book balance to reconcile them, and we can see that they are not matching.

To find the error, we need to look for any transactions that are recorded in one book but not the other. Here, it is highly likely that a $500 deposit was recorded in the book but not on the bank statement.

So, to reconcile the bank statement, we need to subtract $500 from the book balance. 
Adjusted Book balance = $1,205 - $500 = $705

Now, we can see that the adjusted bank balance and adjusted book balance match. 
Both are $1,195, so the answer is C.

In Reconciling a Bank Statement, the Bank Statement Balance Is