Final answer:
A bank statement provides detailed information about all transactions in an account, which assists businesses in maintaining accurate records, detecting discrepancies, and preventing fraud. It is vital for improving internal controls.
Step-by-step explanation:
A bank statement is a document that summarizes all the transactions in an account over a certain period, typically a month. It lists deposits, withdrawals, fees charged, and interest earned, allowing account holders to see all their transaction details at a glance. For a business, it provides an authoritative record of all the financial transactions that have occurred through its bank account.
Improving Internal Control with Bank Statements
Bank statements play a crucial role in improving a business's internal controls. They allow businesses to reconcile their records with the bank's records, ensuring that all transactions have been recorded accurately. This process helps businesses to detect any discrepancies, such as unauthorized transactions or errors. Regularly balancing the checkbook, as hinted, can help a business manage its cash flow effectively, avoid overdrafts, and prevent fees associated with insufficient funds. Additionally, it can help in detecting and preventing fraudulent activities. By maintaining tight controls over their financial transactions, businesses can uphold financial integrity and sound management practices.