Supreme Company\'s bookkeeper prepared the bank reconciliation for May 31, 2010.

Question

Supreme Company's bookkeeper prepared the bank reconciliation for May 31, 2010. The bookkeeper had the following responsibilities: All bookkeeping, the handling of cash receipts, the preparation of the monthly bank reconciliation and the deposit at the bank. Assume that the bookkeeper prepared all of the checks which were signed by the owner. The owner, on a daily basis verified and signed all checks that were written, counted all cash and verified the debit to cash in the cash receipts journal and the credit to cash in the cash payments journal. Assume that the office manager performed all other duties. May 31 Bank Statement Balance of previous bank statement on 4/30 Six deposits and other credits totaling Eleven checks and other debts totaling Current balance as of this statement $ 12,760 7,596 4,977 $ 15, 379 Amount Transition Type $ 915 $1,000 $ 737 $ 850 $ 729 $ 815 Date Deposit Deposit Deposit posl Deposit Deposit 5/28 (581) NSF Check See te 5/2 5/5 5/14 5/21 5/28 5/31 $ (11) Service Charge 5/31 $2,550 Bank Collection (Collection on note, principal $2,500 Date Check # Amount See Carbon Copy of Checks Issued Pages 3-5 $125 $ 112 $500 $215 $ 100 $ 750 5/17 399 $1,000 $ 543 $450 5/29 402 $ 175 $415 391 392 393 5/3 394 54 395 398 5/13 400 5/28 401 5/27 5/31 403

Explanation / Answer

1. The book keeper should not receive the receipts. The manager must receive and do the deposit, so that the book keeper cannot "teem & lade" Rationale - it will prevent the book keeper of from doing fictitious transactions

2. The book keeper should do the bank reconciliation. Rationale: he should account for items not deposited/ or checks not presened

3, The owner must sign the checks. Rationale: the book keeper cannot then manipulate

4. BANK RECONCILIATION 31 5 2010

Balance as per Bank: $15,379

ADD: DEPOSITS

NOT REALISED   915

2550    3465

                                 18844

LESS:

CHECKS UNPRESENTED

#404 $300

#405 160

#406 $514

#407 $800 (1774)

BALANCE AS PER CASH BOOK SHOULD BE $17070

The embezzlement is the $2550 which could be hidden by book keeper

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