Question

Caroline Haines manages May Advertising. Haines fears that a trusted employee has been stealing from the company. This employee receives cash from clients and also prepares the monthly bank reconciliation. To check up on the employee, Haines prepares her own bank reconciliation, as follows:

May Advertising

Bank Reconciliation

May 31, 2016

Bank

Books

Balance, May 31

$4,050

Balance, May 31

$4,120

Add:

Add:

Deposits in transit

800

Bank collections

800

Interest revenue

60

Less:

Less:

Outstanding checks

(900)

Service charge

(65)

Adjusted bank balance

$3,950

Adjusted book balance

$4,915

Does it appear that the employee has stolen from the company? If so, how much? Explain your answer. Which side of the bank reconciliation shows the company's true cash balance?

It appears the employee has _____ The adjusted _____ balance is the company's true cash balance, and the _____ more cash on hand. Therefore, the books must be _____

May Advertising

Bank Reconciliation

May 31, 2016

Bank

 

Books

 

Balance, May 31

$4,050

Balance, May 31

$4,120

Add:

 

Add:

 

Deposits in transit

800

Bank collections

800

 

 

Interest revenue

60

Less:

 

Less:

 

Outstanding checks

(900)

Service charge

(65)

Adjusted bank balance

$3,950

Adjusted book balance

$4,915

       

 

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