Sheridan Company is a very profitable small business. It has not, however, given much consideration to internal control. For exa
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Sheridan Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Bret Turrin handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.
The balance per the bank statement on October 31, 2020, was $17,920. Outstanding checks were No. 62 for $160.20, No. 183 for $191, No. 284 for $275.25, No. 862 for $211.40, No. 863 for $232.00, and No. 864 for $182.60. Included with the statement was a credit memorandum of $116.00 indicating the collection of a note receivable for Daisey Company by the bank on October 25. This memorandum has not been recorded by Daisey.
The company’s ledger showed one Cash account with a balance of $21,910.00. The balance included undeposited cash on hand. Because of the lack of internal controls, Bret took for personal use all of the undeposited receipts in excess of $4,400.00. He then prepared the following bank reconciliation in an effort to conceal his theft of cash.
| Cash balance per books, October 31 | $21,910.00 | |||||
| Add: | Outstanding checks | |||||
| No. 862 | $211.40 | |||||
| No. 863 | 232.00 | |||||
| No. 864 | 182.60 | 526.00 | ||||
| 22,436.00 | ||||||
| Less: Undeposited receipts | 4,400.00 | |||||
| Unadjusted balance per bank, October 31 | 18,036.00 | |||||
| Less: Bank credit memorandum | 116.00 | |||||
| Cash balance per bank statement, October 31 | $17,920 |
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