Bank reconciliation and internal control
Following is a bank reconciliation for Surf Shop for June 30, 2012:
| Cash | Bank |
| Account | Statement |
Balance as of 6/30/2012 | $ 1,618 | $ 3,000 |
Deposit in transit |
| 600 |
Outstanding checks |
| (1,507) |
Note collected by bank | 2,000 |
|
Bank service charge | (25) |
|
NSF check | (1,500) |
|
Adjusted cash balance as of 6/30/2012 | $ 2,093 | $ 2,093 |
When reviewing the bank reconciliation, Surf’s auditor was unable to locate any reference to the NSF check on the bank statement. Furthermore, the clerk who reconciles the bank account and records the adjusting entries could not find the actual NSF check that should have been included in the bank statement. Finally, there was no specific reference in the accounts receivable supporting records identifying a party who had written a bad check.
Required
a.Prepare a corrected bank reconciliation.
b. What is the total amount of cash missing, and how was the difference between the “true cash” per the bank and the “true cash” per the books hidden on the reconciliation prepared by the former employee?
c. What could Surf’s Shop do to avoid cash theft in the future?
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