Which is an example of a reconciling item affecting the company’s cash balance?

In the context of reconciling a cash balance, bank service fees represent an expense that diminishes the company’s cash on hand. When reviewing a company’s bank statement, any fees charged by the bank that have not yet been recorded in the company's books will need to be recognized to align the accounting records with the bank's records. This adjustment is essential because it reflects a cash outflow that effectively reduces the company’s available cash.

In contrast, outstanding checks and deposits in transit don’t directly affect the company’s cash balance as recorded in its books; instead, they represent timing differences in cash movement. Outstanding checks have been issued by the company but have not yet cleared the bank, thus not affecting the bank's records yet. Similarly, deposits in transit are amounts received by the company but not yet processed by the bank, which also creates a discrepancy that needs reconciliation. Cleared transactions refer to those that have been completed and processed without any impact on the reconciliation process regarding the current cash balance. Understanding the nature of each item is essential for effectively managing cash flow and ensuring accurate financial reporting.