The records of Clairemont Company indicate an August 31, 2013, cash balance of $

Question

The records of Clairemont Company indicate an August 31, 2013, cash balance of $6,675, which includes undeposited receipts for August 30 and 31. The cash balance on the bank statement as of August 31 is $5,350. This balance includes a note of $3,000 plus $210 interest collected by the bank but not recorded in the journal. Checks outstanding on August 31 were as follows: No. 370, $580; No. 379, $615; No. 390, $900; No. 1148, $225; No. 1149, $300; and No. 1151, $750.
On August 9, the cashier resigned, effective at the end of the month. Before leaving on August 31, the cashier prepared the following bank reconciliation:

Subsequently, the owner of Clairemont Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $2,500 to be deposited on August 31. The owner, a close family friend, has asked your help in determining the amount that the former cashier has stolen.
1. Determine the amount the cashier stole from Clairemont Company. Show your computations in good form.

2. How did the cashier attempt to conceal the theft?

3. a. Identify two major weaknesses in internal controls that allowed the cashier to steal the undeposited cash receipts.
b. Recommend improvements in internal controls, so that similar types of thefts of undeposited cash receipts can beprevented.

Explanation / Answer

Solution :

Break up for stolen money

cheque no 370 - $580

cheque no 379 - $615

cheque no 390 - $ 900

misc cash - $ 100

Total stolen cash = $ 2195

2. after arriving at cash balnace as on August 2013 as per books , cashier added one more item which should have been considered before arriving at this cash balance as per books.By deducting the interest and note amount , cashier just concealed the amount of theft

Also he has not considered all outstanding cheques while reconcilinmg which is difficult to trace unless there s a solid base for the same.

3.a. 1.serial numbers of cheques issued chequed for any inconsistency is not activated

2. no cross check to observe discrepancy in receipts received and receipts entered.

3. b.1. auto adding of cheques which are not debited in bank statement

2. cash receipts to be manually cross checked before sending them to enter in books

3. physical counting of cash balance

particulars $ $ Balance as per books 6675 Less : Note and interest not recorded in journal (3210) Add : Outstanding checks (580+615+900+225+300+750) 3370 Less ; undeposited receipts (2500) Balance as per bank 4335 cash balance as per reco statement 2140 stolen 2195

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