Briefly explain the importance of preparing Bank Reconciliation Statement and analyze the adjustments and the treatment...

Briefly explain the importance of preparing Bank Reconciliation Statement and analyze the adjustments and the treatment of the adjustments that needs to be considered under bank statement and cash book statement. You can access online resources to get the required information while maintaining APA referencing guidance [ 5 marks] [ minimum 500 words].

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Bank reconciliation statement is a statement that reconciles the bank account and financial records of an entity. This statement( for a specific period) outlines the deposits, withdrawals and other activities that affects the bank account. Bank reconciliation statement is prepared to find out if there is any discrepancies in the accounting records of the entity and bank.

Importance of preparing Bank reconciliation statement:

It helps to identify any error in the accounting record of the bank or the company.
It protects the cash ( that is the most valuable asset of an entity) by providing a control mechanism that uncovers any irregularities for example: unauthorized bank withdrawals.
It helps to monitor cash flow of a business.
If the balance as per cash book and balance as per pass book matches it states that the transactions are recorded correctly.

The adjustments and the treatment of the adjustments that needs to be considered under bank statement and cash book statement:

Cheque issued but not presented: This happens when a cheque is issued and sent to the supplier but is not presented in the bank for payment.
Interest credited by the bank: It happens when interest has ben credited by the bank but is not recorded in the books of the company.
Cheque deposited but not credited by the bank: This happens when a cheque is deposited with the bank but that cheque is not cleared by bank.
Bank charges not recorded in the cash book: It happens that bank directly deducts charges such as bank charges which is not recorded in the books of the company.

ekkarill92 answered 2 years ago

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