A bank reconciliation is performed to ensure both the company's and the bank's records agree after adjustments.

• A. False
• B. True
• C. It is optional
• D. Only for errors in the ledger

Answer: (B)

The main idea is that a bank reconciliation checks and aligns two sets of records—the company’s cash ledger and the bank statement—by identifying timing differences and items the other side has processed. A bank reconciliation is performed so that after you record necessary adjustments, the company’s cash balance and the bank’s balance line up. Differences typically come from deposits in transit (the company has recorded a deposit, but the bank hasn’t processed it yet) and outstanding checks (the company has written checks that haven’t cleared the bank yet), as well as items the bank has recorded that the company hasn’t (bank fees, service charges, interest, or errors). By adjusting the company’s books for these items and correcting any errors, you ensure the records agree and the cash balance reported in the financial statements is accurate. It’s a routine internal control practice, not optional, and it covers timing differences as well as actual errors or fees, not just ledger mistakes.