Which type of account typically requires bank reconciliations?

Cash accounts typically require bank reconciliations because they directly involve transactions that are recorded in both the company's accounting records and the bank's ledger. A bank reconciliation is the process of comparing and matching the cash balance on the company's books to the amount shown on the bank statement. This is essential for ensuring that the records are accurate and that any discrepancies are identified and resolved.

Cash transactions can include deposits, withdrawals, checks written, and bank fees, all of which might not be recorded in the same time frame by both the company and the bank. By performing bank reconciliations, a business can confirm that all cash inflows and outflows are correctly accounted for and that the company's cash balance reflects its actual available funds. This practice helps prevent fraud, ensures proper cash management, and maintains accurate financial reporting.