Final answer:
A debit memorandum on Cinco Inc.'s bank statement should be deducted from the book balance during the company's bank reconciliation process.
Step-by-step explanation:
When Cinco Inc. sees a debit memorandum on its May bank statement, it means the bank has reduced the company's account balance for some reason. This could be due to bank fees, overdraft charges, or other deductions made by the bank. Therefore, in the May bank reconciliation, the amount of the debit memorandum will need to be deducted from the book balance. Bank reconciliations are used to ensure the company's cash records agree with the bank's records by adjusting the cash balance in the company's books to reflect any items not yet recorded by the bank or the company.
To reconcile the account, the company will start with the book balance, add any deposits in transit, deduct outstanding checks, and then make any other adjustments such as adding or deducting bank errors, interest earned, or charges like the debit memorandum shown. Any discrepancy between the bank and book balances must be investigated and resolved to ensure accurate financial statements.