Unit 6 Journals

Question 1

Bank reconciliation can be used as an internal control for cash in many ways. One, bank reconciliation is a crucial accounting tool with the ability to reconcile the variations in the cash balance, thus very important in detecting and preventing fraud, as reflected in the book of accounts and the statements from the bank. They also help make out errors associated with accounting by availing elucidations of the disparities between the bank balance and cash balances position as per the bank statement. It is shown that adjusting entries are made based on the variations in the cash balance, as indicated in the accounts book. This depicts that a bank reconciliation statement, BRS can be a vital tool when it comes to verification of a company’s bank balance. Meaning, through a BRS, management can ascertain disparities between the cash balance in an organization’s books and the cash balance, as reflected on the bank statement. Furthermore, as an internal control tool, bank reconciliation can aid in the identification of causes or reasons for differences in the balance as indicated by the bank statement and cash accessible with the company at any instance. An examination of the differences will aid a company in keeping track of receipts and payments, which will assist in uncovering possible fraud or errors. The reports also guarantee completeness by assisting in ensuring that the receipts and payments which have passed via the account have been documented in the accounting reports

Question 2

Given that bank reconciliation is required for adjustments and identification of errors and irregularities for the Cash account and segregation of duties, the person receiving cash should not be the one that preparing bank reconciliation. This is because the person may manipulate the real and accounting balance for their own benefit. Any disparities recognized in the accounting and the statements ought to be corrected by an individual different from the one doing the reconciliations. Also, given that a person receiving cash is involved in several disbursement functions and cash receipts, a bank reconciliation statement should be prepared by an accountant who does not have access to monetary funds to bring about the separation of duties. A review and posting of transactions daily are done inside the department of accounting by different accounting staff to guarantee all wires, account holders deposits and withdrawals, returned checks, and any other electronic items are documented daily. It is depicted that the establishment of segregation of responsibilities is helpful in the prevention of fraud by requiring complicity for unauthorized actions.