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Question

The main purpose of preparing a bank reconciliation statement is ___________.

A
to know the bank balance
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B
to compare the entries in the cash and pass books
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C
to correct the cash after comparing with pass books
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D
to reconcile balance shown in the passbook with balance shown in cash book
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Solution

The correct option is D to reconcile balance shown in the passbook with balance shown in cash book
  • Bank Reconciliation is a statement prepared to reconcile the balance of bank as per pass book with the balance in cash book.
  • The difference in the two balances are due to time gap of cheques deposited but not cleared, cheques issued but not presented for payment, direct payments by the bank, interest and dividend income credited by the bank, etc.
  • All these differences are to be given effect in order to match the balances as per the pass book and cash book.

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