You add outstanding deposits to the balance of the bank statement when you are doing a reconciliation.

• A. True
• B. False
• C. It depends
• D. Not applicable

Answer: (A)

Timing differences in cash reconciling happen when deposits in transit are added to the bank balance. Deposits in transit are amounts the company has recorded as cash but the bank hasn’t credited yet. Because the bank statement doesn’t include these funds at the moment of reconciliation, you add them to the bank’s balance to reflect cash that will be available once the bank processes the deposit. The goal is to arrive at an adjusted bank balance that matches the company’s ledger, with other timing items like outstanding checks subtracted as needed.