Stephen used a reconciliation worksheet, but his checkbook balance does not match the final worksheet balance. Evaluate the following list of possible errors that he has made. Decide which items could potentially correct this problem if found and corrected.

Question

Item number
Name of potential error
Explanation of what to verify
I
Clearing the checkbook
All the transactions on the statement that match transactions in the checkbook should be marked as cleared in the checkbook.
II
Correcting checkbook omissions
All transactions on the statement that were not found in the checkbook should have been entered into the checkbook.
III
Outstanding credits and debits
Verify that the sum of outstanding credits and the sum of outstanding debits are correct.
IV
Math
Verify that all addition and subtraction has been done correctly and there are no transpositions of numbers.
V
Previous reconciliation
Verify that the previous reconciliation was performed correctly, and that all cleared items are marked as such in the checkbook.

Choose the option below that correctly describes the items that could have caused this problem with Stephen’s reconciliation.
a.
I, III, IV, and V could cause the problem, but not II.
b.
I, II, III, and V could cause the problem, but not IV.
c.
All five of the potential errors could cause this sort of problem.
d.
I and II could cause the problem since there are no math errors.

Answer 1

The correct option is:

c. All five of the potential errors could cause this sort of problem.

Each of the five items listed relates to common issues that could occur during a bank reconciliation process. Here's how each item could potentially lead to the discrepancy between Stephen's checkbook balance and the final worksheet balance:

• I (Clearing the checkbook): If transactions are not marked as cleared in the checkbook, it could cause an incorrect balance.

• II (Correcting checkbook omissions): If transactions from the bank statement are missing from the checkbook, that could also lead to discrepancies in the balance.

• III (Outstanding credits and debits): If the sums of outstanding credits or debits are incorrect, that could affect the final balance.

• IV (Math): Errors in addition, subtraction, or transpositions in calculations could definitely affect the final balance.

• V (Previous reconciliation): If the previous reconciliation was not completed correctly, it could influence the current balance.

Given that errors could stem from any one of these areas, all five potential issues are relevant to the reconciliation discrepancy.