Question

What are two reports that can be used to reconcile a cash register? Explain (50–80 words) the distinguishing features of each.

Answer 1

Solution:

The two reports used to reconcile a cash register are:
1. Bank Reconciliation Statement - A bank reconciliation compares the bank statement and our company’s records and reconciles or balances to two account balances. Bank reconciliations are completed at regular intervals to ensure that the company’s cash records are correct.

When banks send companies a bank statement that contains the company’s beginning cash balance, transactions during the period, and ending cash balance, almost always, the bank’s ending cash balance and the company’s ending cash balance will never be the same. Some bank reconciliation items are:

• Deposits in transit: Cash and checks that have been received and recorded but have not yet been recorded on the bank statement.
• Outstanding checks: Checks that have been issued by the company to creditors but the payments have not yet been processed.
• Bank service fees: Banks deduct charges for services they provide to customers but these amounts are usually not noticeable.
• Interest income: Banks pay interest on some bank accounts.
  

2. Cash Flow Statement: A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

The bifurcation of the Statement of Cash Flows:

1. Operating Activities: The principal revenue-generating activities of an organization and other activities that are not investing or financing; any cash flows from current assets and current liabilities
2. Investing Activities: Any cash flows from the acquisition and disposal of long-term assets and other investments not included in cash equivalents
3. Financing Activities: Any cash flows that result in changes in the size and composition of the contributed equity capital or borrowings of the entity (i.e., bonds, stock, dividends)