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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Using bank reconciliation to determine cash receipts stolen

Alaska Impressions Co. records all cash receipts on the basis of its cash register tapes. Alaska Impressions Co. discovered during October that one of its salesclerks had stolen an undetermined amount of cash receipts while taking the daily deposits to the bank. The following data have been gathered for October:

Cash in bank according to the general ledger $11,680
Cash according to the October 31 bank statement 13,275
Outstanding checks as of October 31 3,670
Bank service charge for October 40
Note receivable, including interest collected by bank in October 2,100

No deposits were in transit on October 31.

  1. a. Determine the amount of cash receipts stolen by the salesclerk.
  2. b. What accounting controls would have prevented or detected this theft?

(a)

To determine

Calculate the amount of cash receipts stolen by the sales clerk.

Explanation

Bank Reconciliation Statement: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Calculate the amount of cash receipts stolen by the sales clerk.

Step 1: Prepare bank reconciliation statement.

Company A

Bank Reconciliation

October 31

ParticularsAmount ($)Amount ($)
Cash balance according to bank statement 13,275
Deduct: Outstanding checks 3,670
Adjusted balance9,605
Cash balance according to company’s records 11,680...

(b)

To determine

Identify the internal controls that are used in preventing / detecting the theft.

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