Bank reconciliation statements

Another factor which should be considered by a business before relying on the information contained within bank statements is whether the statements reconcile with the business's own record of the bank account as shown in the cash book. Usually there are items in the bank statements which have not yet been recorded in the cash book, such as bank charges, standing orders and direct debits, and items in the cash book which are not yet shown in the bank statement, such as unrepresented cheques (i.e. cheques not yet banked by the recipients) . A reconciliation should be made to agree the two versions of the account.

Control accounts have a number of advantages for management:

• Total receivables and payables figures can be produced at any time by balancing the control accounts . This avoids the need to calculate every individual balance within the personal ledgers.

• Fraud can be prevented if the person responsible for compiling and checking the control accounts is a supervisor unconnected with the day-to-day bookkeeping procedures. This also provides an independent check on the quality and accuracy of the accounting records.

• Errors within a double-entry bookkeeping system can be located to a specific ledger, which avoids unnecessary effort when finding mistakes.

• The control accounts themselves can be brought within the double-entry bookkeeping system as part of the general ledger, with the receivables' and payable' individual accounts in the personal ledgers then being treated as detailed, 'subsidiary' records outside the system. This has the great advantage of summarizing all the receivables ledger and parables ledger information within just two ledger accounts, with the balances on these accounts providing the receivables and parables figures for the trial balance.