Question: What would cause a bank statement not to agree with the cash balance in the accounting records?

• The bank made an error in recording a deposit made by the company.
• The company made an error in recording a deposit.
• The company wrote checks that have cleared the bank.
• The band paid interest that the company has not recorded.
• Deposits outstanding that have been recorded on the company’s records, but not on the bank’s.

Correct Answer:

The company made an error in recording a deposit.

Explanation:

When a bank statement and the cash balance in accounting records do not match, it is usually due to discrepancies between the company’s accounting records and the bank’s records. Here’s why the answer is correct:

1. The company made an error in recording a deposit:
   • This is a common cause of discrepancy. If the company records a deposit incorrectly (e.g., wrong amount or date), it will not match the bank statement, causing a difference in cash balances.

The other options are less likely to be the primary cause of discrepancy:

2. The bank made an error in recording a deposit made by the company:
   • While possible, bank errors are relatively rare. In this case, the company would typically notice the mismatch and resolve it with the bank.
3. The company wrote checks that have cleared the bank:
   • When checks clear the bank, they are reflected in both the bank statement and the company’s accounting records, so this typically doesn’t cause discrepancies.
4. The bank paid interest that the company has not recorded:
   • This would cause a discrepancy, but it involves an item the company hasn’t recorded yet, not an error in the company’s own deposit recording.
5. Deposits outstanding that have been recorded on the company’s records, but not on the bank’s:
   • This situation typically reflects timing differences (e.g., deposits made late in the month or over a weekend), and is usually corrected through reconciliation rather than causing an initial discrepancy.