Purchase Solution

bank reconciliation

Not what you're looking for?

Ask Custom Question

(See attached file for full problem description)

---
Gigantic Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Jake Stickyfingers handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.

The balance per the bank statement on October 31, 2002, was $18,280. Outstanding checks were: no. 62 for $326.75, no. 183 for $150, no. 284 for $253.25, no. 862 for $190.71, no. 863 for $226.80, and no. 864 for $165.28. Included with the statement was a credit memorandum of $300 indicating the collection of a note receivable for Gigantic Company by the bank on October 25. This memorandum has not been recorded by Gigantic Company.

The company's ledger showed one cash account with a balance of $21,892.72. The balance included undeposited cash on hand. Because of the lack of internal controls, Stickyfingers took for personal use all of the undeposited receipts in excess of $3,795.51. He then prepared the following bank reconciliation in an effort to conceal his theft of cash.

BANK RECONCILIATION
Cash balance per books, October 31 $21,892.72
Add: Outstanding checks
No. 862 $190.71
No. 863 226.8
No. 864 165.28 482.79
22,375.51
Less: Undeposited receipts 3,795.51
Unadjusted balance per bank, October 31 18,580.00
Less: Bank credit memorandum 300.00
Cash balance per bank statement, October 31 $18,280.00

Instructions

(a) Prepare a correct bank reconciliation. (Hint: Deduct the amount of the theft from the adjusted balance per books.)

(b) Indicate the three ways that Stickyfingers attempted to conceal the theft and the dollar amount pertaining to each method.

(c) What principles of internal control were violated in this case?
---

Attachments
Purchase this Solution

Solution Summary

What principles of internal control were violated in this case?

Purchase this Solution


Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.