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CSEET · Fundamentals of Accounting · Bank Reconciliation Statement

A business prepares a Bank Reconciliation Statement (BRS) at the end of each month. Which of the following best describes its main objective?

The main objective of a Bank Reconciliation Statement is to explain the difference between the cash book bank balance and the pass book balance. It lists the items causing the gap, helping detect errors and delays, and it does not replace the cash book.

  1. ATo record all bank transactions in the cash book for the first time
  2. BTo explain the difference between the balance in the cash book and the balance in the bank pass bookCorrect
  3. CTo calculate the interest payable on the bank overdraft
  4. DTo replace the need for maintaining a bank column in the cash book

Explanation

A BRS is prepared to identify and explain the reasons for the difference between the bank balance shown by the cash book and that shown by the pass book. It is not a book of original entry and does not replace the cash book. Option A is wrong because transactions are first recorded in the cash book, not through the BRS.

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