Which one of the statements appearing below is correct regarding bank reconcilia

Question

Which one of the statements appearing below is correct regarding bank reconciliations?

a) A bank reconciliation is an external report prepared to report the cash balance to investors and creditors.

b) After preparing a bank reconciliation, no journal entries need to be made for outstanding checks or deposits in transit.

c) If a company's records show a different cash balance from that shown on the company's bank statement, either the company or the bank has made an error.

d) The up-to-date ending cash balance on the bank statement side should not equal the up-to-date ending cash balance on the book side.

Explanation / Answer

b) After preparing a bank reconciliation, no journal entries need to be made for outstanding checks or deposits in transit. - Correct since there is no error in this case as it is just due to timing difference/processing delay due to standard process

a) A bank reconciliation is an external report prepared to report the cash balance to investors and creditors.- Incorrect it is prepared for knowing the reason for diff b/w cash and bank balance for the purpose of mgt.

c) If a company's records show a different cash balance from that shown on the company's bank statement, either the company or the bank has made an error. Incorrect- it is one of the reason but sometimes there may be difference due to cut off time/date as indicated in point b

d) The up-to-date ending cash balance on the bank statement side should not equal the up-to-date ending cash balance on the book side.Incorrect

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