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During the month of July, Clanton Industries issued a check in the amount of $723 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:______.
A. Deduct the check amount from the book balance of cash.
B. Add the check amount to the book balance of cash.
C. Adam Deduct the check amount from the bank balance.
D. Add the check amount to the bank balance.
E. Make a journal entry in the company records for an error.

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Parrain

Answer: C. Deduct the check amount from the bank balance.

Explanation:

This is an outstanding check which means that it has reflected as a reduction in the book balance but not in the bank balance.

The way to reconcile it therefore is to deduct it from the bank balance that way it will reduce the bank balance the same way it had reduced the book balance.

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