Which of the following is a primary benefit of maintaining a checking account for bank reconciliation purposes?

• A. It eliminates the need for internal controls over cash.
• B. It guarantees that all checks issued will never be returned due to insufficient funds.
• C. It provides a detailed record of all cash transactions, making it easier to identify discrepancies between the company's books and the bank statement.
• D. It allows unlimited interest earnings on deposited funds.

Answer: (C)

Verified step by step guidance

1. Understand the purpose of a checking account in financial accounting. A checking account is used to manage cash transactions and provides a detailed record of all inflows and outflows.
2. Recognize the importance of bank reconciliation. Bank reconciliation is the process of comparing the company's cash records with the bank statement to identify discrepancies and ensure accuracy.
3. Evaluate the options provided in the problem. Eliminate choices that are incorrect or irrelevant, such as 'eliminates the need for internal controls over cash' (internal controls are always necessary) and 'guarantees checks will never be returned due to insufficient funds' (this depends on the account balance).
4. Focus on the correct answer: 'It provides a detailed record of all cash transactions, making it easier to identify discrepancies between the company's books and the bank statement.' This aligns with the purpose of a checking account and the reconciliation process.
5. Understand why the other options are incorrect. For example, 'allows unlimited interest earnings on deposited funds' is not a primary benefit of a checking account, as checking accounts typically earn little to no interest compared to savings accounts.