Question

In a bank reconciliation, outstanding cheques are:

a) deducted from the bank balance on the bank statement
b) added to the bank balance in the general ledger
c) deducted from the bank balance in the general ledger
d) added to the bank balance on the bank statement

Answer 1

Outstanding cheques are deducted from the bank balance on the bank statement during bank reconciliation to match the company's cash records with the bank's records for accuracy.

Step-by-step explanation:

In a bank reconciliation, outstanding cheques are deducted from the bank balance on the bank statement. This is because outstanding checks represent money that has been spent (recorded in the general ledger) but has not yet cleared the bank. Essentially, they are checks that have been written and recorded in the business's cash book or general ledger but have not yet been processed or 'cashed' by the bank. In a bank reconciliation process, all transactions including outstanding cheques are used to reconcile or match the company's cash records against the bank's records to ensure accuracy and consistency.