Question

A review of the bank statement and accounting records of the Blake Company revealed the following items:

Item No. Description

1) Three outstanding checks
2) A debit memo showing a bank service charge
3) A deposit in transit
4) An NSF check written by one of Blake’s customers
5) A certified check written by Blake
6) A credit memo reflecting interest revenue earned by Blake
Which of the item(s) would be subtracted from the company's unadjusted book balance to determine the true cash balance?

a. Item numbers 2 and 4.
b. Item numbers 2, 4, and 5.
c. Item numbers 1 and 4.
d. Item numbers 1, 2, 4, and 5.

Answer 1

a. Item numbers 2 and 4.

Step-by-step explanation:

At the time of the bank reconciliation statement, there are two statements i.e book statement and the bank statement.

While at the time of recording the true cash balance, the following items should be deducted that are

1. Bank service charges

2. NSF checks

All other items are not relevant for subtracting it from the unadjusted book balance.