Description
Purpose of Assignment
Reconciling bank accounts is a good way to help maintain internal controls over cash. With time lags and posting errors it is easy for cash transactions to be omitted, recorded in a different accounting period, or reflect incorrect amounts. This assignment with give you practical experience in reconciling the cash balance as noted on the company books to the bank's records.
Assignment Steps
Resources: Financial Accounting: Tools for Business Decision Making
Scenario: Daisey 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 book-keeper. As a result, Bret Turrin handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.
The balance per the bank statement on October 31, 2017, was $18,380. Outstanding checks were No. 62 for $140.75, No. 183 for $180, 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 $185 indicating the collection of a note receivable for Daisey Company by the bank on October 25.
This memorandum has not been recorded by Daisey.
The company's ledger showed one Cash account with a balance of $21,877.72. The balance included undepositied cash on hand. Because of the lack of internal controls, Bret 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:
| Cash balance per books, October 31 | $21,877.72 | |
| Add: Outstanding checks | ||
| No. 862 | $190.71 | |
| No. 863 | 226.80 | |
| No. 864 | 165.28 | 482.79 |
| 22,360.51 | ||
| Less: Undeposited receipts | 3,795.51 | |
| Unadjusted balance per bank, October 31 | 18,565.00 | |
| Less: Bank credit memorandum | 185.00 | |
| Cash balance per bank statement, October 31 | $18,380.00 |
Prepare a 650-word bank reconciliation report (hint: deduct the amount of the theft from the adjusted balance per books) including the following:
- Indicate the three ways that Bret attempted to conceal the theft and the dollar amount involved in each method.
- What principles of internal control were violated in this case?
Explanation & Answer
Attached.
Running head: BANK RECONCILIATION REPORT
1
Daisy Company
Bank Reconciliation Statement as at 31st October,2017
$
Balance as per bank statement
$
18,380
Add:
Un-deposited Receipts
3,795.51
Less:
Outstanding Cheques
No: 62
140.75
No: 183
180
No: 284
253.25
No: 862
190.71
No: 863
226.80
No: 864
165.28
Total Outstanding Cheques
1156.79
Balance as per books
21, 877.72
Less Amount Stolen
(859)
Cash Balance as per 31st October
21,018.72
21,018.72
BANK RECONCILIATION REPORT
2
Introduction
Bank Reconciliation is a process of comparing the company’s records against the
company’s records. Reconciliation of bank accounts is a vital practice that actively maintains the
internal records over cash. Ideally, it identifies any possibility of inaccurate information and allows
an account officer to make suitable alterations. It provides a check on the accuracy of entries made
on the bank statement and cash book. Moreover, it aids in updating the cash book by identifying
the omitted entries in the records. Bank reconciliation also indicates any undue delays in the
collection and clearance of unpresented and uncredited cheques....
