Each item should be shown on a bank reconciliation as follows:
(a) Outstanding checks: Add outstanding checks to the cash balance per book.
(b) Bank debit memorandum for service charge: Deduct the bank debit memorandum for the service charge from the cash balance per bank.
(c) Added to cash balance per bank Bank credit memorandum for collecting from customer an electronic funds transfer: Add the bank credit memorandum for the electronic funds transfer to the cash balance per bank.
(d) Deposit in transit: Deduct the deposit in transit from the cash balance per book.
How to show the items on a bank reconciliation
Outstanding checks are issued by Forde Co. and they have been recorded in their books although they have not cleared the bank yet. Therefore, they increase the book balance compared to the bank balance. As such, they should be added to the cash balance per book.
The bank debit memorandum for service charge is a fee charged by the bank to Forde Co., which reduces their bank balance but has not been recorded in their books yet. So, it is a decrease in the bank balance compared to the books. A deduction is necessary in this case.