In the context of bank reconciliation, in which account would you expect to see payments received but not yet deposited?

• A. Petty Cash
• B. Accounts Receivable
• C. Undeposited Funds
• D. Cash Over and Short

Answer: (C)

Verified step by step guidance

1. Understand the concept of bank reconciliation: Bank reconciliation is the process of comparing the bank statement with the company's accounting records to identify discrepancies and ensure accuracy.
2. Identify the nature of payments received but not yet deposited: These are payments that the company has received but has not yet physically deposited into the bank account. They are temporarily held in an intermediary account.
3. Recognize the purpose of the 'Undeposited Funds' account: This account is used to record payments received but not yet deposited. It acts as a holding account until the funds are deposited into the bank.
4. Compare the other options provided: Petty Cash is used for small, immediate expenses; Accounts Receivable represents amounts owed by customers; Cash Over and Short is used to record discrepancies in cash handling. None of these accounts are appropriate for payments received but not yet deposited.
5. Conclude that the correct account for payments received but not yet deposited is 'Undeposited Funds,' as it accurately reflects the temporary holding of these payments before they are deposited into the bank.