Delicious Pies Pty Ltd 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 jobs of cashier and bookkeeper have been combined. As a result, Rob Rowe handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations. 

The balance as per the bank statement on 31 October 2017 was $25 732. Unpresented cheques were: no. 62 for $177.45, no. 183 for $210, no. 284 for $354.55, no. 862 for $266.99, no. 863 for $317.52, and no. 864 for $231.39. Included on the bank statement was a credit entry of $280 indicating the collection of a note receivable for Delicious Pies Pty Ltd by the bank on 25 October. This entry had not been recorded by Delicious Pies Pty Ltd.

The entity’s ledger showed one cash account with a balance of $30 369.81. The balance included undeposited cash on hand. Because of the lack of internal controls, Rowe took for personal use all of the undeposited receipts in excess of $5313.71. He then prepared the following bank reconciliation statement in an effort to conceal his theft of cash:

Required

(a) Prepare a correct bank reconciliation statement.

(b) Indicate the three ways that Rowe attempted to conceal the theft and the dollar amount involved in each method.

(c) What principles of internal control were violated in this case?  

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Cash balance as per company records, 31 October Add: Unpresented cheques No. 862 No. 863 No. 864 Less: Undeposited receipts Cash balance as per bank statement, 31 October $266.99 317.52 231.39 $30 369.81 675.90 31 045.71 5313.71 $25 732.00