Question

Which of the following item would cause cash per the hank statement to be smaller than the balance of cash show in the accounting records?
A. Check #777 written by the company in payment of a debt for $730.10 a recorded by the bank as $701.30
B. Deposits in transit
C. Interest earned on the average balance of the checking accounted
D. Outstanding checks
E. All of the above would cause the balance per bank statement to be greater than the balance per books.

Answer 1

Answer:

The correct answer is B

Explanation:

Deposit in transit is the term which is defined as the checks and cash which have been collected and reported by an entity in the books, but it is not yet recorded or processed in the records of the bank where the funds are deposited.

So, the item of deposit in transit will cause the cash per bank statement to be smaller than the balance of cash showed in the accounting records because it is that cash which is received by the company and sent to the bank but not yet processed or posted to the bank account by the bank.