Practice Quiz

RTRP - IRS Registered Tax Return Preparer Test

Category - Accounting

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Bart’s Brewskies is reconciling the company’s bank account. Assuming that all transactions flow through one account, which of the following transactions will Bart’s subtract from their bank statement’s ending balance to reconcile the accounts?
  1. Bounced checks from customers
  2. Checks that Bart wrote to purchase more hops that are not showing as cashed
  3. Deposits in transit to the bank.
  4. Cashed checks
  5. Missing deposits
Explanation
Answer - B - The checks that Bart wrote that have not yet been cashed should be subtracted from the bank statement’s ending balance when reconciling the account.

Key Takeaway: Transactions that are added or subtracted from the bank statement’s ending balance during account reconciliation should be transactions that have not yet been recognized by the bank. A and D answers have already been recognized by the bank and thus, will be shown in the bank statement. Answers C and E have yet to be recognized on the bank statement, but it will be an addition to the ending balance. The uncashed checks should be deducted from the bank statement’s balance, as it has already been deducted from Bart’s checkbook balance.
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