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Question: If a check that was outstanding on last period’s bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period’s reconciliation, the amount of this check should be:

If a check that was outstanding on last period’s bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period’s reconciliation, the amount of this check should be:

Added to the book balance of cash.

Deducted from the book balance of cash.

Added to the bank balance of cash.

Deducted from the bank balance of cash.

Ignored in preparing the period’s bank reconciliation.

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General guidance

Concepts and reason

Bank Reconciliation: Itis a process which is followed to identify the reason for any differences in the cash balance as per bank statement and cash balance as per accounting records of the organization. It is an important part of the organization which helps in controlling cash. Fundamentals

Cash Book: Cash receipts and cash payments are recorded as a special journal in a book is called a cash book.

Pass Book: It is the book which is provided by the bank to show the receipts and payment through the specified banks only as credit and debit balance. Show more First Step | All Steps | Answer Only

Step-by-step

Step 1 of 2

Amount of check will not be added as it will increase the book balances by the same amount. Thus, this option is incorrect.

Amount of check will not be deducted from the book cash balance as it was already deducted from the book balance of cash. Thus this option is incorrect.

Amount of check will not be added to the bank balance of cash rather it should be deducted from the bank balance of cash. Thus this option is incorrect.

Amount of check will not be ignored in preparing the period’s bank reconciliation. It is because this transaction affects the balances of both books. Thus this option is incorrect. Explanation | Hint for next step

Amount of check will not be added to the book balance of cash as it will increase the book balance of cash by the same amount which is not the correct treatment.

If the amount of this check is deducted from the book balance of cash it will be deducted and balances of both the books will not be matched.

If added to the bank balance of cash it will increase by the same amount which is not the correct treatment. If added, the bank balance of cash will get increased.

It cannot be ignored in preparing the period’s bank reconciliation as all the transaction have some effects on either the book balance or bank balance.

Use the information regarding cash book, pass book and checks transaction to identify correct option.

Step 2 of 2

The amount of check will make the balance of both the books equal if it is deducted from the bank balance of cash. Thus, this option is correct.

The amount of this check should be deducted from the bank balance of cash.
Explanation

If any check which is showing as an outstanding check in the last year’s bank reconciliation statement and is not among those checks which were returned by the bank, then while making the current period reconciliation statement amount of check must be deducted from the book cash balance.

When a check was issued, it must have deducted from the book balance of cash. However, the same was not paid till the date of reconciliation statement. For giving the right treatment it should also be deducted from the bank balance of cash. It will make the balances of both books equal.

Answer

The amount of this check should be deducted from the bank balance of cash.

Answer only

The amount of this check should be deducted from the bank balance of cash.



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