Which of the following items would increase the depositor's book balance during a bank reconciliation?

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

Answer: (B)

Verified step by step guidance

1. Understand the concept of bank reconciliation: Bank reconciliation is the process of comparing the bank statement with the depositor's book balance to identify discrepancies and ensure accuracy.
2. Identify the impact of each item on the depositor's book balance: Bank service charges decrease the book balance, interest earned increases the book balance, outstanding checks decrease the book balance, and deposits in transit do not directly affect the book balance but are adjustments to the bank statement.
3. Focus on the item that increases the book balance: Interest earned on the account is the only item that increases the depositor's book balance because it represents additional income credited by the bank.
4. Explain why other items do not increase the book balance: Bank service charges are expenses deducted by the bank, outstanding checks are payments not yet cleared, and deposits in transit are amounts not yet reflected in the bank statement but already recorded in the book balance.
5. Conclude that during a bank reconciliation, interest earned on the account is the item that increases the depositor's book balance.