Cash ControlsJulius Wells is the owner of a successful small construction company. He spen...

Cash Controls

Julius Wells is the owner of a successful small construction company. He spends most of his time out of the office supervising work at various construction sites, leaving the operation of the office to the company’s cashier/bookkeeper, Gloria Harris. Gloria makes bank deposits, pays the company’s bills, maintains the accounting records, and prepares monthly bank reconciliations.

Recently a friend told Julius that while he was at a party he overheard Gloria bragging that she paid for her new dress with money from the company’s cash receipts. She said her boss would never know because he never checks the cash records.

Julius admits that he does not check on Gloria’s work. He now wants to know if Gloria is stealing from him. He asks you to examine the company’s cash records to determine whether Gloria has stolen cash from the business and, if so, how much.

Your examination of the company’s cash records reveals the following information.

1. Gloria prepared the following August 31, 2010, bank reconciliation.

2. An examination of the general ledger shows the Cash account with a balance of $18,786 on August 31, 2010.

3. The August 31 bank statement shows a balance of $16,589.

4. The August 28 deposit of $4,882 does not appear on the August 31 bank statement.

5. A comparison of canceled checks returned with the August 31 bank statement with the cash payments journal reveals the following checks as outstanding:

Prepare a bank statement using the format presented in this chapter for the month of August. Assume there were no bank or bookkeeping errors in August. Did Gloria take cash from the company? If so, how much and how did she try to conceal the theft? What changes would you recommend to Julius to provide better internal control over cash?