Giant Inc. is a 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, Karen Kilgora handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.

The balance per bank statement on November 30 was $13,655. Outstanding cheques were #62 for $127, #83 for $180, #84 for $253, and #86 for $190. There was one deposit in transit for $4,040. Included in the bank statement was a notification about a $225 electronic collection on account from a customer.

The company's general ledger showed the Cash account with a balance of $17,341. The balance included undeposited cash on hand. Because of the lack of internal controls, Kilgora took all of the undeposited receipts, which were recorded on the company's books, for her personal use. She then prepared the following bank reconciliation to hide her theft of cash:

Instructions
(a) Identify the errors in the above bank reconciliation.
(b) Prepare a correct bank reconciliation.
(c) Identify how much Kilgora stole for personal use.
(d) Indicate the various ways that Kilgora tried to hide the theft and the dollar amount for each method.
(e) What control activities were violated in this case?

Transcribed Image Text:

GIANT INC. Bank Reconciliation November 30 Cash balance per books Less: EFT, collection from customer Adjusted cash balance per books $17,341 225 $17,116 Cash balance per bank statement Add: Deposit in transit $13,655 4,040 17,695 Less: Outstanding cheques #62 #83 #84 #86 $127 108 235 109 579 $17,116 Adjusted cash balance per bank