Final answer:
The discrepancy between book balance and bank balance is due to time lags and errors. Time lags relate to the delay in transactions being recorded on the bank's or company's side, and errors can be made by either the bank or the bookkeeper. Errors and time lags must be reconciled to ensure accurate financial statements.
Step-by-step explanation:
The reason for the lack of agreement between the balance per books and the balance per bank can be attributed to both time lags in recording transactions and errors by either the bank or the bookkeeper. Time lags may occur because it takes time for transactions to clear and be reflected in the bank's or the company's books. For example, a check issued by the company may not immediately appear as a deduction in the bank's records until it is processed. Similarly, deposits in transit might not yet appear in the bank's statement. Errors can be made on either side; the bank may incorrectly record an amount, or the bookkeeper might enter a transaction wrongly or forget to record it altogether.
Understanding the concepts of assets, liabilities, and the role of banks highlights how money listed on a balance sheet might not be physically present in a bank due to it being loaned out or invested, meaning the assets include loans, bond ownership, and reserves, not just the physical cash on hand. When it comes to buying loans in the secondary market, various factors influence whether a loan is more or less valuable, such as the borrower's payment history, overall economic interest rates changes, and the borrower's financial health.
Furthermore, the lack of perfect information in the market can lead to difficulties in pricing loans, as buyers and sellers may have different perceptions of the risk and value associated with the loan without full knowledge of all relevant factors. This highlights the importance of transparent and accurate information in making financial decisions.