Which item would be added to the bank's balance to arrive at the company's book balance?

• A. Outstanding checks
• B. Deposits in transit
• C. Bank service charges
• D. Interest earned

Answer: (B)

In bank reconciliation, you adjust the bank balance to match the company’s ledger balance by adding items that the company has already recorded but the bank hasn’t processed yet. Deposits in transit fit this, because the company has recorded the cash receipt, increasing its book balance, but the bank hasn’t credited the deposit yet, leaving the bank’s balance temporarily lower. Adding deposits in transit to the bank balance brings it in line with the book balance. By contrast, outstanding checks would reduce the bank balance when reconciling, and items like bank service charges or interest earned are adjustments typically affecting the book balance.