If a payment is directly deducted from your bank account but not yet recorded in your company's books, how should this be treated during the bank reconciliation process?

• A. It should be added to the book balance.
• B. It should be subtracted from the bank balance.
• C. It should be added to the bank balance.
• D. It should be subtracted from the book balance.

Answer: (D)

Verified step by step guidance

1. Understand the concept of bank reconciliation: Bank reconciliation is the process of comparing the company's book balance (cash account) with the bank statement to identify discrepancies and ensure accuracy.
2. Identify the nature of the transaction: A payment deducted from the bank account but not yet recorded in the company's books represents an unrecorded expense or withdrawal.
3. Determine the impact on the book balance: Since the payment has already been deducted from the bank account, the company's book balance must be adjusted to reflect this transaction.
4. Apply the adjustment: To reconcile the book balance, subtract the amount of the payment from the book balance because it represents an expense that has not yet been recorded.
5. Verify the reconciliation: After making the adjustment, ensure that the adjusted book balance matches the bank statement balance, accounting for all other reconciling items.