1. Why is a Bank Reconciliation Statement necessary?
Answers
Answer:importance of bank reconciliation statement
Explanation:
-Preparation of bank reconciliation helps in the identification of errors in the accounting records of the company or the bank.
-Cash is the most vulnerable asset of an entity. Bank reconciliations provide the necessary control mechanism to help protect the valuable resource through uncovering irregularities such as unauthorized bank withdrawals. However, in order for the control process to work effectively, it is necessary to segregate the duties of persons responsible for accounting and authorizing of bank transactions and those responsible for preparing and monitoring bank reconciliation statements.
-If the bank balance appearing in the accounting records can be confirmed to be correct by comparing it with the bank statement balance, it provides added comfort that the bank transactions have been recorded correctly in the company records.
-Monthly preparation of bank reconciliation assists in the regular monitoring of cash flows of a business.