How do you record an outstanding check on bank reconciliation?

How do you record an outstanding check on bank reconciliation?

• A. Subtract amount from bank balance
• B. Add amount to bank balance
• C. Subtract amount from book balance
• D. Add amount to book balance

Answer: (A)

Outstanding checks are checks you’ve issued that haven’t cleared the bank yet. In a bank reconciliation, you adjust the bank balance to reflect these checks by subtracting their amount, because the bank’s statement still shows more cash than the company’s books until those checks clear. The company’s records already reflect the outflow when the check was written, so you don’t change the book balance for outstanding checks. Subtracting from the bank balance aligns the two records; adding to the bank balance or altering the book balance would misstate the timing of the cash movements.

Outstanding checks are checks you’ve issued that haven’t cleared the bank yet. In a bank reconciliation, you adjust the bank balance to reflect these checks by subtracting their amount, because the bank’s statement still shows more cash than the company’s books until those checks clear. The company’s records already reflect the outflow when the check was written, so you don’t change the book balance for outstanding checks. Subtracting from the bank balance aligns the two records; adding to the bank balance or altering the book balance would misstate the timing of the cash movements.