Future Business Leaders of America (FBLA) Accounting Practice Test

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What is the process of verifying that cash balances are correct known as?

Cash Management
Proving Cash
Cash Reconciliation
Cash Verification

The correct answer is: Proving Cash

The process of verifying that cash balances are correct is known as "Proving Cash." This method typically involves comparing the cash counted in the register or company records against the balances indicated in the accounting records to ensure that they match. Essentially, it is a way to confirm the accuracy of cash records during a specific period. This process is critical for maintaining accurate financial records and ensuring that any discrepancies can be identified and addressed promptly. By proving cash, businesses can detect errors, prevent fraud, and ensure that their cash management practices are sound. While "Cash Management," "Cash Reconciliation," and "Cash Verification" might sound similar, they refer to broader or different aspects of handling cash. Cash Management focuses on the overall strategy for handling and maximizing cash flow within a company. Cash Reconciliation usually pertains to a more extensive process that involves comparing the company’s cash records to bank statements over a certain period, often involving a deep dive into discrepancies. Cash Verification can imply a more generalized checking process, which might not specifically entail proving the exact cash balances as precisely defined in the term "Proving Cash."