Which statement is true about the reconciliation discrepancy report in the context of bank reconciliation?

• A. It eliminates the need for adjusting journal entries.
• B. It is used to record outstanding checks as deposits in transit.
• C. It identifies differences between the bank statement and the company's accounting records.
• D. It is prepared by the bank to notify the company of service charges.

Answer: (C)

Verified step by step guidance

1. Understand the purpose of a reconciliation discrepancy report: It is a tool used during the bank reconciliation process to identify and explain differences between the bank statement and the company's accounting records.
2. Clarify the role of adjusting journal entries: Adjusting journal entries are necessary to correct discrepancies found during reconciliation, such as recording bank fees or correcting errors in the company's books.
3. Explain the concept of outstanding checks and deposits in transit: Outstanding checks are payments issued by the company but not yet cleared by the bank, while deposits in transit are amounts recorded by the company but not yet reflected in the bank statement. These are not recorded in the discrepancy report but are part of the reconciliation process.
4. Highlight the role of the bank in reconciliation: The bank does not prepare the reconciliation discrepancy report; this is done by the company to ensure its records align with the bank statement.
5. Conclude that the correct statement is: The reconciliation discrepancy report identifies differences between the bank statement and the company's accounting records, helping the company resolve these discrepancies.