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You should have recorded in your cash books all amounts you?ve actually received and payments you?ve actually made. However, the cash books may be incomplete as your bank may have put extra transactions through your account, such as:
bank fees or interest charges
direct debits (payments) and direct credits (receipts).
Doing a regular bank reconciliation will allow you to:
take into account any extra transactions your bank puts through your account, and
check and record any errors or omissions.
By regularly doing a bank reconciliation (say monthly) you can be more confident that your records contain all the information you need to prepare your income tax return and activity statements.
reconciliation- This is a statement prepared to find the reason for difference in any two balance.
eg 1)bank reconciliation is prepared to find the reason of difference between the passbook & cash book balance
2)Stock reconciliation is prepared to the reason of difference between the physical balance & book balance or to find the stock balance as on certain date.
etc
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