What should be added to the bank balance during reconciliation?

During the reconciliation process, deposits in transit should be added to the bank balance. This is because these deposits have been recorded by the company and reflected in the company's books but have not yet been processed by the bank. Therefore, they are missing from the bank's recorded balance at the time of reconciliation. Essentially, these deposits will increase the overall balance of the bank account once they are cleared or processed by the bank.

In contrast, outstanding checks represent amounts that have been deducted from the company's books but have not yet cleared the bank. They would be subtracted from the bank balance during reconciliation. Checks received from another company, if not deposited yet, would fall into a similar category where they do not affect the bank balance until processed. Additionally, bank service charges are expenses that are taken directly from the bank account, which would also be deducted from the bank balance rather than added.