Concept explainers
a.
Introduction: Bank reconciliation statements means to reconcile entities’ or organization’s bank accounts and its financial statements. By reconciling the bank accounts and financial statements of the organization it outlines the withdrawals and deposits and other activities relating to the bank account which affects the financial status of the organizations. Bank reconciliation is a part of internal
To determine: The difference of bank reconciliation and online review of bank statement.
b.
Introduction: Bank reconciliation statements means to reconcile entities’ or organization’s bank accounts and its financial statements. By reconciling the bank accounts and financial statements of the organization it outlines the withdrawals and deposits and other activities relating to the bank account which affects the financial status of the organizations. Bank reconciliation is a part of internal control system which helps to detect fraud.
To identify: And explain at least two frauds or errors that would be uncovered through a bank reconciliation that would not be uncovered through an online review of the bank statement.
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Loose Leaf for Financial Accounting: Information for Decisions
- A bank reconciliation takes time and must balance. An employee was struggling in balancing the bank reconciliation. Her supervisor told her to plug (make an unsupported entry for) the difference, record to Miscellaneous Expense, and simply move on. Discuss the internal controls problem with this directive.arrow_forwardWhich of the following statements about reconciling items is true? A Debit memoranda should be subtracted from the book side of the bank reconciliation. B An NSF check returned to the bank should be added back to book cash. C If a company discovers errors in its general ledger Cash account, it should call the bank to have the errors corrected. D Adjustments to the bank side of the bank reconciliation should be booked as adjustments to the general ledger Cash account. Please advise, the answer D is correct?arrow_forwardWhen reviewing your client's Profit and Loss report, you see a number of transactions posted to the wrong account. However, the bank and credit card accounts have all been reconciled properly. Your client doesn't remember adding these transactions. What might have happened? Your client used the Reclassify Transactions tool Someone imported these transactions and their reconciliation status directly from Excel Your client added the transactions through Bank Feeds, using an item that posted to the wrong account Your client incorrectly added a transaction, accepted a suggested rule based on that posting, and also chose auto-addarrow_forward
- Drag the choices below to the following observations, in the course of preparing the Bank Reconciliation using the Adjusted Balance method. Match each item to a choice: Cost of ordered checks automatically debited by the bank Customer's NSF check returned by the bank Deposit of P717,718 erroneously encoded by the bank teller as P717,178 Check encashment for another client, erroneously debited by the bank against our асcount Outstanding checks Interest income Customer's post-dated check erroneously deposited and returned by the bank Bank service fees Customer's payment directly credited to depository bank Deposit in transit Choices: : Deduct from balance per book : Deduct from balance per book : Deduct from balance per book : Not a reconciling item : Add to balance per bank Deduct from balance per book : Add to balance per book Add to balance per bank : Add to balance per book Add to balance per bank : Deduct from balance per bank :::arrow_forwardAfter you have completed a bank reconciliation, there can be numerous un‐ reconciled bank statement debits. In your own words, explain the difference between a debit order and a stop order.arrow_forward"The current month's bank statement for your account arrives in the mail. In reviewing the statement, you notice a deposit listed for $400 that you did not make. It has been credited in error to your account. Discuss whether you have an ethical or legal obligation to inform the bank of the error. What action should you take?" Thoroughly discuss the pros and cons of what the results would be if you reported it versus not reporting it. Be sure to tell what option you would choose and explain why."arrow_forward
- S1: Bank reconciliation is important because it is an opportunity to check for fraudulent activity and to prevent financial statement errors. S2: Cash set aside for a particular purpose may be classified as current or non-current depending on the purpose for its establishment. S3: A cash short or over account is debited when the petty cash fund proves out short. S4: If there is a bank overdraft, it is necessary to adjust and create a bank overdraft account in the ledger. a. All statements are correct. b. All statements are incorrect. c. Only two statements are correct. d. Only one statement is correct. e. Only one statement is incorrect.arrow_forwardWhat if the drawee bank failed to determine right away that the CHECK is supposed to be dishonored and yet made payment to the holder of the CHECK, what is the remedy of the bank in this case? Can it go after the drawer or check issuer?arrow_forwardAllison Everhart, an employee in accounts payable, believes she can run a fictitious invoice through the accounts payable system and collect the money. She knows payments are subject to an audit. Which account would be the best place to hide the fraud?a. Inventory.b. Wage expense.c. Consulting service expense.d. Property tax expense.arrow_forward
- What documentation should an auditor inspect when a client has paid off a bank note? How could an employee defraud the company if the bank note has no indication of being paid?arrow_forwardThe Perfect Crime. Embezzlers often try to cover up by removing canceled checks theymade payable to themselves or endorsed on the back with their own names. Missing canceled checks are a signal (red flag). However, people who reconcile bank accounts may notnotice missing checks if the bank reconciliation is performed using only the numerical listing printed in the bank statement. Now consider the case of truncated bank statements forwhich the bank does not even return the canceled checks to the payer. All of the checks are“missing,” and the person performing the bank reconciliation has no opportunity to noticeanything about canceled checks. Consider the following story of a real embezzlement.The embezzler hired a print shop to print a private stock of Ajax Company checks in thecompany’s numerical sequence. In his job as an accounts payable clerk, he intercepted legitimate checks written by the accounts payable department and signed by the Ajax treasurerand then destroyed them. He…arrow_forwardTrue or False. 9. An NSF check is a reconciling item that does not require an adjusting entry in the books of the depositor.10. Adjusting journal entries are prepared based on the reconciling items on the bank side of the bank reconciliation.11. A bank statement is prepared by the depositor to reconcile the difference between his records and bank records.arrow_forward
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