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CA Foundation · Accounting · Bank Reconciliation Statement

Which of the following is a valid reason why a business should prepare a Bank Reconciliation Statement regularly?

A Bank Reconciliation Statement is prepared regularly because it helps detect errors, omissions and frauds in the cash book or the bank's records and establishes the correct bank balance. It is an internal control tool, not a statutory filing, and it does not alter the actual balance.

  1. AIt helps detect errors and frauds in the cash book or by the bank, and shows the true bank balanceCorrect
  2. BIt is compulsory to file it with the Registrar of Companies each year
  3. CIt eliminates the need for the bank to send a pass book or statement
  4. DIt converts the bank overdraft into a favourable balance

Explanation

Regular reconciliation reveals errors, omissions and possible fraud or misappropriation, and helps ascertain the correct bank balance. It is not filed with the Registrar, does not replace the bank statement, and cannot change the real balance.

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