An accountant at Leo Ltd. recorded a cheque payment to a supplier as 1,340.56, whereas the bank processed the cheque correctly for 3,140.56. No correcting entries have been made, and the discrepancy was not identified during bank reconciliation. What is the effect of this error?

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The Trial Balance will show discrepanciesThe creditor's account is reported lower than actualMaterial purchases are recorded at a lesser amountThe bank statement balance will appear lower than the cash book balanceNo impact on financial records

Explanation

The Trial Balance will still balance because both debit and credit totals remain equal. The creditors' balance is actually overstated, not understated, due to the lower payment recorded. Purchases are unaffected since this transaction relates to payment, not purchase recording. The main impact is on the bank balances: the bank statement shows a higher deduction (3,140.56) than the cash book (1,340.56), resulting in the bank statement balance being lower than the cash book balance. Hence, the correct answer is D.