Question
Requiring that only specifically designated employees are authorized to sign company checks is an example of the internal control principle of:
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 7 — cash and cash equivalents
A bank reconciliation explains the difference between the ledger balance and the bank statement. Only items the business did not yet know about — bank charges, direct credits, dishonoured cheques, interest — produce journal entries; timing differences such as outstanding cheques and deposits in transit adjust the bank side and never hit the books.
Common mistakes
- Journalising outstanding cheques or deposits in transit, which require no entry at all.
- Adjusting the bank side for an error made in the entity's own ledger, or the reverse.
- Reconciling to a corrected balance and then omitting the entries that made it correct.