Question

During the month of July, Clanton Industries issued a check in the amount of $967 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Multiple Choice

A. Deduct the check amount from the book balance of cash.
B. Add the check amount to the book balance of cash.
C. Deduct the check amount from the bank balance.
D. Add the check amount to the bank balance.
E. Make a journal entry in the company records for an error.

Answer 1

Answer:

C. Deduct the check amount from the bank balance

Explanation:

Outstanding Checks should be subtracted from the bank side of the reconciliation because they were subtracted from the book balance when the checks were written.