Which of the following is a reconciling item on the bank side of a bank reconciliation?
a. both "outstanding checks" and "NSF checks"
b. canceled checks
c. outstanding checks
d. NSF checks
The correct answer is option c. outstanding checks.
To determine which option is a reconciling item on the bank side of a bank reconciliation, let's go through each option and understand what it means:
a. "Outstanding checks" are checks issued by the company but have not yet been presented to the bank for payment. These checks are deducted from the company's bank balance during the reconciliation process.
b. "Canceled checks" are checks that have been processed and cleared by the bank. They are not reconciling items because they have been accounted for in the bank statement.
c. "Outstanding checks" (mentioned previously) are reconciling items. These checks represent payments made by the company but have not been cashed or cleared by the bank. They need to be deducted from the bank statement balance during the bank reconciliation.
d. "NSF checks" stands for "non-sufficient funds" checks. These are checks deposited by a company but returned by the bank due to insufficient funds in the payer's account. These checks are also a reconciling item as they need to be deducted from the bank statement balance during the reconciliation process.
Based on the explanations above, the correct answer is option a. Both "outstanding checks" and "NSF checks" are reconciling items on the bank side of a bank reconciliation.
Well, it can't be C because the bank doesn't know about those until they're deposited.
So which of the other 3 possibilities is obvious?