Deposits outstanding
Deposits outstanding are deposits that the company has received that have yet to be recorded by the bank!
We can pinpoint here...
Question: On April 31st, 2022, Hats LLC has a Cash balance of $800. Over the course of the month, they wrote $10,000 in checks, but $200 of those checks haven’t been processed by CashForDays bank. In addition, $170 out of their $20,000 in cash receipts still needs to be deposited in CashForDays Bank.
However, on their bank statement, it shows a Cash Balance of $850 and includes the following items not yet recorded by the company: a note receivable collected by the bank for $200, interest earned on that note of $20, and a bank service fee of $50. In addition, the bank accidentally charged Hats LLC $50 for a service fee that was meant to be on another customer’s account. Lastly, one of Hats LLC customer’s checks for $100 returned back with non-sufficient funds.
Prepare the bank reconciliation to correct the ending Cash Balance on April 31st, 2022.
...that "$170 out of their $20,000 in cash receipts still needs to be deposited in CashForDays Bank" yet. Those deposits are the definition of deposits outstanding!
Remember, deposits outstanding add to the Bank's Cash Balance...
Bank's Cash Balance Items
| Reconciling Item | Description | Add or Subtract to Cash Balance? |
|---|---|---|
| Deposits outstanding | Deposits made by the company, not recorded by the bank yet. | Add |
| Checks outstanding | Checks written by the company, not recorded by the bank yet. | Subtract |
| Bank error | Bank accidentally charges (or forgets to charge) the company. | Add / Subtract (it depends) |
...so we'll place those $170 deposits outstanding on the Bank's Cash Balance side of our bank reconciliation like so:
Bank's Cash Balance
| Per Bank Statement | $850 |
| Deposits outstanding | $170 |
| ??? | ??? |
| ??? | ??? |
| Bank Balance per Reconciliation | ??? |
Company's Cash Balance
| Per General Ledger | $800 |
| ??? | ??? |
| ??? | ??? |
| ??? | ??? |
| Company Balance per Reconciliation | ??? |