Question

Why should a bank reconciliation be prepared periodically?

1) To ensure that the bank balance in the company's records matches the bank statement balance
2) To identify any errors or discrepancies between the company's records and the bank statement
3) To detect any fraudulent activity or unauthorized transactions
4) To reconcile any outstanding checks or deposits

Answer 1

A bank reconciliation should be prepared periodically to ensure that the bank balance in the company's records matches the bank statement balance, identify errors or discrepancies, detect fraudulent activity, and reconcile outstanding checks or deposits.

Step-by-step explanation:

A bank reconciliation should be prepared periodically for several reasons:

1. To ensure that the bank balance in the company's records matches the bank statement balance. This helps in identifying any discrepancies or errors between the two.
2. To identify any errors or discrepancies between the company's records and the bank statement. This includes mistakes in recording transactions or bank fees.
3. To detect any fraudulent activity or unauthorized transactions. Bank reconciliation helps in catching any suspicious or unauthorized transactions that may have occurred.
4. To reconcile any outstanding checks or deposits. This involves comparing the checks issued by the company but not yet cleared by the bank, as well as any deposits in transit.