If recorded tax receipts do not match bank deposits, which process should be used to address the discrepancy?

• A. Ledger reconciliation to identify and correct mismatches.
• B. Immediate suspension of all tax collection activities.
• C. Publicly exposing the discrepancy to taxpayers.
• D. Deleting the mismatched entries without review.

Answer: (A)

When cash receipts don’t align with bank deposits, the essential step is to reconcile the ledger with the bank statement. This reconciliation is the process of comparing what your system records as receipts with what the bank shows as deposits, then uncovering why they don’t match.

During ledger reconciliation, you pull together the cash receipts ledger, the bank deposit slips, and the bank statement. You look for timing differences (deposits in transit or checks outstanding), posting errors (a receipt posted with the wrong amount or to the wrong account), missing receipts, or duplicate entries. Each discrepancy is investigated, and you make the necessary correcting entries in the ledger so the two records agree. You also document the investigation and any adjustments for audit purposes and maintain a clear trail of how the discrepancies were resolved.

This approach is best because it systematically identifies and fixes the root cause of the mismatch, preserves internal control by maintaining an accurate, auditable record, and prevents misstatements or potential misappropriation. Other choices—suspending collection activities, publicly exposing the discrepancy, or deleting entries without review—do not address the issue correctly and undermine controls or legality.