Final answer:
A deposit outstanding in a bank reconciliation does not require a company to adjust their books, as it is already accounted for in the company's ledger and only affects the bank balance when processed. An example T-account balance sheet for a bank with assets including reserves, government bonds, and loans, and liabilities as deposits, shows how to calculate the bank's net worth, which in this example would be $220.
Step-by-step explanation:
If a bank reconciliation included a deposit outstanding of $670, the company's entry for this reconciling item would not include an adjustment to the company's books. Instead, the outstanding deposit represents cash that has been received by the company but not yet recorded by the bank. Therefore, the company's ledger will already account for this amount, and no further entry is required. Outstanding deposits increase the company's book balance but do not affect the bank balance until the bank processes the deposit.
To illustrate, let's use an example where a bank has various figures for their assets and liabilities. Here's how you would set up a T-account balance sheet based on the given data:
- Assets:
- Reserves: $50
- Government Bonds: $70
- Loans: $500
- Liabilities:
To calculate the bank's net worth, you subtract the liabilities from the assets. In this case:
Net Worth = Total Assets - Total Liabilities
Net Worth = ($50 reserves + $70 government bonds + $500 loans) - $400 deposits
Net Worth = $620 - $400
Net Worth = $220
The bank's net worth would be $220 in this scenario, which can also be considered the bank's capital or equity.