A bank reconciliation should be prepared periodically because:

A bank reconciliation should be prepared periodically because:

a) the bank must make sure that its records are correct.

b) the company’s records and the bank’s records are in agreement.

c) the bank has not recorded all of its transactions.

d) any differences between the company’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected.

Answer: d) any differences between the company’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected.

Bank reconciliation is a process that is frequently performed, which involves comparing the records of the particular enterprise’s cash transactions and records of the certain bank. This is important because there may be differences that need to be explained and these includes; there may still be check(s) outstanding, deposit in transit, bank charges something that need to be explained by either party or some errors that have been made. Upon balanced accounts, one is able to see any differences between posted accounts in the company and the company’s bank statement and take the necessary action to rectify the differences. This process also helps in updating the important records of finances, as well as preventing the usual errors or even fraud which at times can lead to inaccurate record of balances in the cash accounts. In this context, bank reconciliation is useful in ascertaining the efficiency of the various internal controls functions in addresses issues to do with data and cash.