Which of the following is most likely to cause a bank statement not to agree with the cash balance in the accounting records?

• A. Outstanding checks that have not yet cleared the bank
• B. Depreciation expense recorded in the accounting records
• C. Payment of dividends in the next fiscal year
• D. Issuance of common stock

Answer: (A)

Verified step by step guidance

1. Understand the concept of a bank reconciliation: A bank reconciliation is the process of comparing the cash balance in the accounting records to the balance shown on the bank statement to identify discrepancies.
2. Identify common causes of discrepancies: Discrepancies can arise due to timing differences, such as outstanding checks, deposits in transit, or errors in recording transactions.
3. Analyze the options provided: Evaluate each option to determine whether it could cause a difference between the bank statement and the accounting records.
4. Option 1: Outstanding checks that have not yet cleared the bank. These are checks issued by the company but not yet processed by the bank, creating a timing difference.
5. Option 2, 3, and 4: Depreciation expense, payment of dividends in the next fiscal year, and issuance of common stock are unrelated to timing differences in cash transactions and would not affect the bank reconciliation process.