Cash book is is one of book of account in which an entity records all its cash receipts and payments. bank statement is records of all customer receipts and withdrawal together with bank charges and other expenses.Also bank statement can be defined as a printed record of the balance in a bank account and the amounts that have been paid into it and withdrawn from it, issued periodically to the holder of the account.
The following are benefits which an entity may deliver by reconciling cash book and bank statement balances:
- It enable out of date cheques to be identified and cancelled in the cash book;
- It acts as the deterrent for fraud due to the bank statement being an independent accounting record prepared by bank;
- It enable missing entries in the cash book to be accounted for hence preventing errors in the financial statement. For example the bank charges and returned cheques;
- It enable errors in the cashbook to be identified and corrected, preventing errors in the financial statement. For example transposition error;
- It enables the errors in the bank statement to be identified/investigated and notified to the bank for correction.