True or False Deposits in transit refer to collections received on the last day of the month which are deposited the first working day of the following month

True or False.

5. Deposits in transit refer to collections received on the last day of the month which are deposited the first working day of the following month.
6. Deposit in transit is a reconciling item which requires an adjusting entry in the books of theÂÂ
   depositor.
7. Bank service charge is an example of an unrecorded bank credit.
8. Bank reconciliation is prepared once a year at the end of the accounting period.
9. An NSF check is a reconciling item that does not require an adjusting entry in the books ofÂÂ
   the depositor.
10. Adjusting journal entries are prepared based on the reconciling items on the bank side ofÂÂ
    the bank reconciliation.
11. A bank statement is prepared by the depositor to reconcile the difference between hisÂÂ
    records and bank records.
12. A bank statement is a letter issued by the bank that certifies the existence of the bankÂÂ
    account.
13. Deposit in transit is a reconciling item added to the unadjusted book balance.
14. Outstanding check is a reconciling item deducted from the unadjusted bank balance.
15. Adjusting journal entries are prepared based on the reconciling items on the bank side ofÂÂ
    the bank reconciliation.

The Correct Answer and Explanation is :

Here are the correct answers with explanations for each statement:

1. True: Deposits in transit refer to funds that have been received and recorded by the company but have not yet been processed by the bank. These typically occur near the end of the accounting period and are deposited the first working day of the following month.
2. False: Deposit in transit is a reconciling item that does not require an adjusting entry in the books of the depositor. It is simply an item that has been recorded by the company but is not yet reflected in the bank’s records.
3. False: Bank service charges are an example of an unrecorded bank debit, not a credit. The bank will charge the depositor’s account, and the depositor must adjust their books to reflect the service charge.
4. False: A bank reconciliation is typically prepared monthly, not once a year. This is necessary to compare the company’s internal records with the bank’s records and to identify discrepancies that need to be adjusted.
5. False: An NSF (Non-Sufficient Funds) check is a reconciling item that does require an adjusting entry in the books of the depositor. If a check is returned due to insufficient funds, the depositor must reverse the original entry, as the funds are no longer available.
6. False: Adjusting journal entries are prepared based on the reconciling items on the book side of the bank reconciliation, not the bank side. These adjustments are made to align the company’s cash records with the actual bank statement.
7. False: A bank statement is prepared by the bank, not the depositor. It shows all transactions processed in the account over a specific period, which is then reconciled with the depositor’s records.
8. False: A bank statement is a document provided by the bank to show the details of all transactions within an account during a given period, such as deposits, withdrawals, fees, and interest.
9. True: Deposit in transit is a reconciling item that is added to the unadjusted book balance during the bank reconciliation process. Since the deposit is not yet recorded by the bank, it is added to the book balance to match the bank balance.
10. True: Outstanding checks are a reconciling item that is deducted from the unadjusted bank balance in the reconciliation process. These checks have been written by the company but have not yet cleared the bank.
11. False: Adjusting journal entries are typically made for reconciling items on the book side of the reconciliation, not the bank side. These include things like deposits in transit, bank fees, or NSF checks that need to be reflected in the company’s records.