During a bank reconciliation, which item would typically be added to the bank balance to reconcile to the book balance?

• A. Outstanding checks
• B. Bank charges
• C. NSF checks
• D. Deposits in transit

Answer: (D)

When reconciling cash, you adjust the bank balance for differences in timing between the bank’s records and the company’s books. Deposits in transit are funds the company has recorded as received, but the bank has not yet credited to the account. Since these deposits will eventually be added to the bank balance, you add them to the bank balance to reconcile it with the book balance.

Outstanding checks are checks issued by the company that haven’t cleared the bank yet, so the bank balance would be higher than the book balance by that amount; these are subtracted from the bank balance rather than added. Bank charges reduce the bank balance and are typically reflected in the books when recorded, so they’re addressed as adjustments to the book balance. NSF checks represent deposits that bounced and reduce the book balance, not something you add to the bank balance.