Reconciliation and verification

Need to know

What you need to know

• Reconciles the business's cash book balance with the bank statement balance.
• Primary causes of differences are timing (unpresented cheques, outstanding lodgements) and items not yet recorded in the cash book (bank charges, direct debits).
• Acts as a key internal control to detect errors and prevent fraud.
• Ensures the cash balance in the statement of financial position is correct.

Explanation

Reconciliation and verification

1. Reconciles the business's cash book balance with the bank statement balance.
2. Primary causes of differences are timing (unpresented cheques, outstanding lodgements) and items not yet recorded in the cash book (bank charges, direct debits).
3. Acts as a key internal control to detect errors and prevent fraud.
4. Ensures the cash balance in the statement of financial position is correct.