xxxnxx PHAROAH COMPANY Bank Reconciliation $ $ $ $ $
Pharoah 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, 2022, was $20,286.00. Outstanding checks were No. 62 for $166.00, No. 183 for $178.00, No. 284 for $291.00, No. 862 for $200.00, No. 863 for $275.00, and No. 864 for $212.00. Included with the statement was a credit memorandum of $203.00 indicating the collection of a note receivable for Pharoah Company by the bank on October 25. This memorandum has not been recorded by Pharoah.
The company’s ledger showed one Cash account with a balance of $23,744.00. 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 $3,832.00. He then prepared the following bank reconciliation in an effort to conceal his theft of cash.
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Cash balance per books, October 31
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$23,744.00 | |||
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Add: Outstanding checks
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||||
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No. 862
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$200.00 | |||
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No. 863
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275.00 | |||
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No. 864
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212.00
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577.00
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24,321.00 | |||
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Less: Undeposited receipts
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3,832.00
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|||
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Unadjusted balance per bank, October 31
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20,489.00 | |||
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Less: Bank credit memorandum
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203.00
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Cash balance per bank statement, October 31
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$20,286.00
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