Q-7-6TI - Horngren'S Financial And Managerial Accounting

Question

Question: For each of the following items, determine whether the item would be:

a. added to the bank balance

b. subtracted from the bank balance

c. added to the book balance

d. subtracted from the book balance

11. Interest revenue earned

12. NSF check

13. Deposit in transit

14. Service charge

15. Outstanding check

Step-by-Step Solution

Answer

Answer:

11) added to the book balance

12) subtracted from the book balance

13) added to the bank balance

14) subtracted from the book balance

15) subtracted from the bank balance

Step 1: Definition of outstanding check

Outstanding checks are those checks that are not presented for the payment.

Step 2: Whether the item is added or subtracted

11. Interest revenue is revenue that increases the balance of the company. Hence, it is added to the book balance.

12. NSF check means checks that do not have sufficient balance in the account. Hence, these checks are deducted from the book balance.

13. Deposit in transit is the balance deposited into the bank but not recorded by the bank; hence, this amount is added to the bank balance.

14. Service charges are the charges collected by the bank hence, it deducted from the book balance as it is not recorded in book balance. 

15. Outstanding check is the check that is issued but not presented for the payment. Outstanding checks are deducted from the bank balance.