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Bank Reconciliation and Internal Control
Bank Reconciliation and Internal Control. Bank reconciliation refers to the process performed by companies in ensuring that a company and its records such as ledger accounts and balance sheet are correct including the bank records. The process begins with the company making notification of balances per the statements and after that making some notations concerning the bank balances.
Possibilities can emerge that the bank received money during the closing date of the organization and recorded it properly in its records (Osborn 2013). It might have been recorded in the bank’s records late and appears in the records of the next bank statement, hence resulting in a deposit in transit.
It is, therefore, an important tool in internal control because it gives an accuracy of the records of accounting in the financial statements of the company. If the bank reconciliation statement is carried out properly, it presents the actual performance and help in the elimination of discrepancies in accounting information. After the adjustment in balance per bank to represent the true balance and the balance per book adjusted, the actual values are a true representation and help in internal control by avoiding omissions due to the hard and tedious process of filling accounting information (Weygandt et al., 2015).
It helps in the preparation of statements of accounts for the disparity amid cash balance according to the bank statements and the money equilibrium in the money account of the company.
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The person receiving cash payments should not perform the reconciliation or prepare the reconciliation statements. When the bank reconciliation is done by someone other than the one authorized to check the record keepers and the signers, internal control over cash has been achieved by the company. The main argument behind this is that, if the same person performs both tasks, then the same discrepancy or omission can be repeated if there was any hidden fault in the records.
References
Osborn, J. P. (2013). A Forensic Accounting Integrated Case. Journal of the International Academy for Case Studies, 19(7), 39.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. John Wiley & Sons.
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