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Question

How would deposits in transit be handled when reconciling the ending cash balance as per the bank statement to the bank balance as per cash book?

A
Added to the balance as per the bank statement.
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B
Subtracted from the balance as per the bank statement
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C
Added to the balance as per company records.
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D
Ignored.
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Solution

The correct option is B Added to the balance as per the bank statement.
In case of deposits in transit the entry would have been entered in the cash book and so the cash book balance would be higher than the bank statement balance
Therefore, while preparing a bank reconciliation statement if balance as per bank statement is the starting point, deposits in transit are added.

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