Final answer:
When identifying outstanding checks in a bank reconciliation, they must be deducted from the balance per bank. This step ensures the bank statement is accurately reconciled with the book records of the cheque issuer, reflecting checks that have been issued but not yet processed by the bank.
Step-by-step explanation:
When performing a bank reconciliation and identifying outstanding checks, the correct action is to deduct the amount of the outstanding checks from the balance per bank. Outstanding checks are cheques that have been written and recorded in the cheque issuer's records but have not yet been cleared by the bank.
Because they have left the issuer's account in terms of bookkeeping but are not yet reflected on the bank's records, it is necessary to reconcile this timing difference to achieve an accurate statement balance.
If an individual were to use a check for payment for goods and services, the store would receive the funds once the check has been processed by the banking institutions.
Balancing your checkbook helps with cash flow management and avoiding overdraft, which occurs when an account's balance goes below zero due to withdrawal transactions exceeding the available balance, often leading to fees.