Final answer:
The $36 error from recording a $182 cheque as $218 should be subtracted from the company's book balance during bank reconciliation. The bank statement balance isn't adjusted because the bank correctly processed the cheque.
Step-by-step explanation:
When the company wrote a cheque for $182 to a supplier but incorrectly recorded it as $218, there is a numerical error that needs to be corrected in the bank reconciliation process. The discrepancy here is $36, which is the difference between what was actually paid and what was recorded. In this case, the $36 error should be subtracted from the company's book balance to correct the overstatement. The bank statement balance, however, would not be adjusted because the bank processed the cheque for the correct amount; the error was solely on the recording side of the company's books.
Bank reconciliations serve as a critical accounting tool to ensure that the company's records match the bank statement. Timely identification of discrepancies, like the one Noel uncovered in the anecdotal example, can prevent significant financial errors or potential fraud. Furthermore, reconciliations play a vital role in accurately reporting the organization's financial position, similar to how Singleton Bank manages its assets and liabilities, or how First National would handle increased deposits and reserves.