Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to balance per books, or (4) deducted from balance per books.

(a) Deposit in transit \(5,500.	(d) Outstanding checks \)7,422.
(b) Bank service charges \(25.	(e) NSF check returned \)377.
(c) Interest credited to Horton’s account $31.

A bank passbook can be defined as thediary reflecting all the deposits, withdrawals, and any other transaction occurring from the bank account.

(a) Deposit in transit will increase the bank account balance. Therefore, it is added to the balance of the bank statement.

(b) Bank service charges reduce the bank balance; therefore, it is also deducted from the balance as per books.

(c) Interest credited to the account will increase the bank balance; therefore, it is also added to the balance as per books.

(d) Outstanding checks reduced the balance of the book balance. Therefore, it is also deducted from the balance of the bank statement.

(e) NSF checks returned by the bank will not be credited to the bank account. Therefore, it is deducted from the book balance.