Do you add outstanding checks when you reconcile the bank statement?

Do you add outstanding checks when you reconcile the bank statement?

• A. Yes, you add
• B. No, you subtract
• C. It depends on the item
• D. Only if the check is returned

Answer: (B)

Outstanding checks are checks you’ve issued and recorded as payments, but the bank hasn’t yet processed. Because the bank’s balance hasn’t been reduced by those checks, the bank statement appears higher than your company records. To reconcile, you adjust the bank balance by subtracting the amount of outstanding checks so the bank balance lines up with your cash account. Deposits in transit work the opposite: they’re in your books but not yet in the bank, so you’d add them to the bank balance. If a check is eventually not cashed or is returned, it would no longer be considered outstanding.

Outstanding checks are checks you’ve issued and recorded as payments, but the bank hasn’t yet processed. Because the bank’s balance hasn’t been reduced by those checks, the bank statement appears higher than your company records. To reconcile, you adjust the bank balance by subtracting the amount of outstanding checks so the bank balance lines up with your cash account. Deposits in transit work the opposite: they’re in your books but not yet in the bank, so you’d add them to the bank balance. If a check is eventually not cashed or is returned, it would no longer be considered outstanding.