Question

For which of the following reconciling items would an adjusting entry be necessary on the company's book?

1) A deposit in transit.
2) An error by the bank.
3) Outstanding checks.
4) A bank service charge.

Answer 1

A bank service charge is a fee charged by the bank for maintaining and processing the company's bank accounts. To reconcile this bank service charge with the company's books, an adjusting entry is necessary.

Step-by-step explanation:

In accounting, a bank service charge is a fee charged by the bank for maintaining and processing the company's bank accounts. This fee is typically deducted from the company's bank account by the bank as a result of providing services such as processing checks, maintaining account records, and providing access to online banking.

To reconcile this bank service charge with the company's books, an adjusting entry is necessary. The adjusting entry would typically involve debiting an expense account (such as Bank Service Charges) and crediting the company's bank account to reflect the deduction of the service charge.

For example, if a bank service charge of $50 is deducted from the company's bank account, the adjusting entry would involve debiting the Bank Service Charges expense account for $50 and crediting the company's bank account by $50 to reflect the reduction in the bank balance.