Comprehensive Bank Reconciliation

timer Asked: Mar 5th, 2018
account_balance_wallet $15

Question 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. 863226.80
No. 864165.28482.79
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 1,050-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?

Show all work in the Excel® spreadsheet and submit with the reconciliation report.

Tutor Answer

Fin Acc Guru
School: UC Berkeley


Bank reconciliation is a control mechanism to safeguard the cash of an organization
(Elliott & Elliott, 2015). Bank reconciliation refers to a process of comparison and matching the
balance in cash ledger (company’s book) and balance in bank statement (bank’s book) to
ascertain cash amount of the company (Turner, Weickgenannt, & Copeland, 2017). More
specifically, Bank reconciliation statement is prepared to confirm the cash balance by matching
the cash balances in the cash ledger and bank statement. Bank reconciliation alone cannot ensure
proper handling of cash and ascertain accurate cash balance when an organization fails to design
an effective internal control and governance structure with other principles such as segregation
of duties and tasks, proper review and supervision, and proper audit and inspection etc.
This paper aims to prepare a correct comprehensive bank reconciliation statement for
Daisey Company to find out the ways relied by Brey Turrin (an employee of the company) to
ensure in fraud in the light of preparation of a comprehensive bank reconciliation statement by
incorporating the theft items, and explore the internal control deficiencies of the company that
created scope for the Brey Turrin to engage into fraud. Brey Turrin has prepared a wrong bank
reconciliation statement for company and engaged in fraud (stealing) with company’s money.
Accurate Comprehensive Bank Reconciliation with Incorporation of Stolen Amount
Brey Turrin alone handles the tasks of receiving cash, book keeping, and monthly bank
reconciliation. Brey has engaged in stealing the company’s fund and prepared wrong bank
reconciliation statemen...

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