Select the alternative that best answers each question or completes each statement.

18. During the process of preparing the bank reconciliation, a. outstanding checks and deposits in transit are added to the balance according to the account statement issued by the bank. b. outstanding checks are subtracted and deposits in transit are added to the balance according to the account statement issued by the bank. c. Outstanding checks and deposits in transit are deducted from the balance based on the statement issued by the bank. d. outstanding checks are added and deposits in transit are subtracted from the balance according to the account statement issued by the bank.

19. Notification of a returned check for insufficient funds (NSF check) is received along with the bank statement. When preparing the bank reconciliation this item a. is subtracted from the balance according to company records. b. is added to the balance according to the account statement issued by the bank. c. is subtracted from the balance according to the account statement issued by the bank. d. is added to the balance according to company records.

20. Bank reconciliation a. must be prepared by the person who records all transactions involving cash b. is part of the internal control systems c. is used for informational purposes only d. sent to bank for verification

21. Which of the following items that appear on the bank reconciliation do NOT require a journal entry to be recorded in the company's accounting books? a. bank service charges b. deposits in transit c. checks returned for insufficient funds (NSF checks) d. check written for $630, erroneously noted as $360 on company records

22. Which of the following items should be added to the balance sheet according to company records in a bank reconciliation? a. bank service charges b. outstanding checks c. deposits in transit d. receivable notes collected by the bank