Using Bank Reconciliation to Determine Cash Receipts Stolen Alaska Impressions C

Question

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:

No deposits were in transit on October 31.

a. Determine the amount of cash receipts stolen by the sales clerk.
$

b. What accounting controls would have prevented or detected this theft?

Cash in bank according to the general ledger $7,030 Cash according to the October 31 bank statement 16,240 Outstanding checks as of October 31 4,640 Bank service charge for October 20 Note receivable, including interest collected by bank in October 7,520

Explanation / Answer

Solution:(a): Calculation of amount of cash receipts stolen by the sales clerk:

The general ledger says that bank has $14,530 of cash but the Bank statement balance shows that bank has $11,600 cash. Therefore, the amount of cash receipts stolen by the sales clerk is = 14,530-11,600

= $2,930

Solution:(b): The theft of the cash receipts might have been prevented by having more than one person make the daily deposit. Collusion between two individuals would then have been necessary to steal cash receipts. In addition, two employees making the daily cash deposits would tend to discourage theft of the cash receipts from the employees on the way to the bank.

Particulars Amount ($) Cash per general ledger 7,030 Add: Note Receivable plus interest 7,520 Less: Bank service charge (20) Cash Balance for General Ledger 14,530 Cash as per Bank statement 16,240 Less: Outstanding checks (4,640) Bank statement balance 11,600

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