Question

The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to: a. determine the amount of cash in the account actually available to the entity. b. satisfy generally accepted accounting principles. c. verify the amount of petty cash on hand. d. determine the amount of the entity’s accounts payable.

Answer 1

Answer:- The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to:- determine the amount of cash in the account actually available to the entity (Option a).

Explanation:- Bank reconciliation statement is a report which compares the bank balance as per company's accounting records with the balance stated in the bank statement.

The purpose of preparing a Bank Reconciliation Statement is to detect any discrepancies between the accounting records of the entity and the bank besides those due to normal timing differences. Such discrepancies might exist due to an error on the part of the company or the bank.