Which of the following is a common mistake made when managing current cash needs?

• A. Recording all transactions immediately and accurately
• B. Failing to reconcile the bank statement regularly
• C. Separating duties for cash handling and record-keeping
• D. Maintaining a cash budget and monitoring cash flows

Answer: (B)

Verified step by step guidance

1. Understand the concept of managing current cash needs: This involves ensuring that a business has enough liquidity to meet its short-term obligations while avoiding inefficiencies or errors in cash management.
2. Review the options provided in the problem: Each option represents a practice related to cash management. Analyze each one to determine whether it is a mistake or a best practice.
3. Option 1: 'Recording all transactions immediately and accurately' - This is a best practice in cash management as it ensures accurate financial records and prevents errors.
4. Option 3: 'Separating duties for cash handling and record-keeping' - This is another best practice that helps prevent fraud and errors by implementing internal controls.
5. Option 4: 'Maintaining a cash budget and monitoring cash flows' - This is a critical best practice for effective cash management, as it helps businesses plan for future cash needs and avoid liquidity issues. The correct answer is Option 2: 'Failing to reconcile the bank statement regularly,' which is a common mistake that can lead to undetected errors or fraud.