What is the consequence of not adjusting for outstanding checks during bank reconciliation?

When performing a bank reconciliation, outstanding checks represent amounts that have been written and recorded in the company's cash account but have not yet cleared the bank. If outstanding checks are not adjusted for during reconciliation, it can lead to an overstatement of the cash account balance. This is because the cash account reflects amounts that the company believes are available, not considering that certain checks have not yet reduced the actual balance in the bank.

By not making this adjustment, the reported balance on the company's books may suggest it has more cash available than it truly does. This misrepresentation can have significant implications for decision-making and financial reporting, as management might make financial decisions based on inflated cash levels.

While the other options mention inaccuracies in the bank statement, liabilities, or financial reports, the critical consequence of not adjusting for outstanding checks directly pertains to the cash account being overstated, which affects the reliability of the company's financial statements.