In the Book to Bank Method, which balance is adjusted to agree with the other?

• A. The company's book balance is adjusted to agree with the bank balance.
• B. The bank balance is adjusted to match the company's book balance.
• C. Both balances are reconciled to a third figure.
• D. Only the bank balance is considered in reconciling.

Answer: (A)

In the Book to Bank method, you start with the company’s cash balance in its own records and adjust that balance so it matches what the bank shows on the bank statement. The bank balance is treated as the reference, and you make adjustments on the books for items the bank has recorded (or will record) such as deposits in transit and outstanding checks, so the book balance ends up equal to the bank balance. This is different from adjusting the bank balance to agree with the books, which is the Bank Balance Method.