Question

2. Why is a bank reconciliation statement prepared?
(a) It is generally experienced that when a
comparison is made between the bank
balance as shown in the firm's cash book and the
bank statement, the two balances
do not tally.
(b) To find out the cash balance.
(c) To understand short term liabilities.
(d) None of the above​

Answer 1

Answer:

Correct option is D)

It is generally experienced that when a comparison is made between the bank balance as shown in the firm's cash book and the bank balance shown in the bank book, the two balances do not tally. Hence, we have to ascertain the causes of differences thereof and then reflect them in a statement called Bank Reconciliation Statement to reconcile (tally) the two balances.

In order to prepare a bank reconciliation statement there is a need of bank balance as per the cash book and a bank statement as on particular day along with details of both the books. If the two balances differ, the entries in both the books are compared and the items on account of which the difference has arisen are ascertained with the respective amounts involved so that the bank reconciliation statement may be prepared