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Question: A bank reconciliation should be prepared:

A bank reconciliation should be prepared:

a. whenever the bank refuses to lend the company money.

b. when an employee is suspected of fraud.

c. to explain any difference between the depositor’s balance per books and the balance per bank.

d. by the person who is authorized to sign checks.

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General guidance

Concepts and reason

Bank Reconciliation Statement: It is a process using which the balance as per the bank pass book and cash book are matched at the end of the accounting period.

In simple words, it is a process performed to ensure that the company’s record and bank records are duly matched and correct.

The main purpose of bank reconciliation is that it is used to compare our records with that of the bank. It confirms the accuracy of the balances shown in the company’s books and bank records.

Bank Reconciliation detects and rectifies any error committed in the records. It also gives indications to update the books if some entries are not recorded and also check any undue delay in the collection and clearance of some check.    Fundamentals

Depositor balance: It is referred to the amount deposited in the bank by the depositor. It is the amount shown in the records of the depositor books of accounts.

Balance as per bank: Balance as per bank is the balance amount shown in the bank statement.

Checks: A printed document ordering the bank to make the payment to the person names as mentioned in check.

Fraud: Any unlawful activity conducted by any person with the intention of personal benefit.

Bank: Banks are those institutions which are involved in depositing and lending the money. Show more First Step | All Steps | Answer Only

Step-by-step

Step 1 of 2

Bank reconciliation should not be prepared when a company refuses to lend money because the difference between bank balance and depositors balance difference is irrelevant for determining the reason for the refusal.

Bank reconciliation should not be prepared if an employee is suspected of fraud because the organization requires to evaluate organizational records and employee records

Bank reconciliation is not prepared by authorized to sign check because bank reconciliation is prepared by the bookkeeper or the accountant of the company Explanation | Hint for next step

Bank reconciliation statement purpose is to identify any error in recording and difference in balance in bank and depositor’s books. However, when a bank refuses to lend money if the income is not sufficient or the Applicant Company fails to provide the required collateral security. So, bank reconciliation is not required to be prepared when a company refuses to lend money.

If the employee suspects of fraud then company conduct the internal audit and check the effectiveness of internal control, evaluate organizational records and employee records. Bank reconciliation statement would not be appropriate or sufficient evidence for identifying any fraud by an employee. Thus, bank reconciliation should not be prepared if an employee is suspected of fraud.

Bank reconciliation is prepared by the bookkeeper or the accountant of the company but usually not by the person who is authorized to sign checks. Accountant at the end of a specific period reconciles the bank statement. Thus, bank reconciliation should not be prepared by the person who is authorized to sign checks.

Use the information on bank reconciliation to identify the correct option.

Step 2 of 2

Bank reconciliation statement should be prepared for explaining any difference between balance as per bank and depositors balance as per book as it ensures accurate recording of bank balance in books of accounts.

Bank reconciliation statement is prepared for explaining the difference between Balance as per bank and balance as per books.
Explanation

The bank reconciliation statements compare the balances between the cash book and the balance as per bank statement. It identifies the errors, any cost charged by the bank but not recorded. It monitors any undue delay in clearance and collection of the check.

It is prepared for the correctness of the balance shown in the bank statement and bank balance as per the book. Therefore, bank reconciliation statement should be prepared for explaining any difference between balance as per bank and depositors balance as per the book.

Answer

Bank reconciliation statement is prepared for explaining the difference between Balance as per bank and balance as per books.

Answer only

Bank reconciliation statement is prepared for explaining the difference between Balance as per bank and balance as per books.



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