Lynn Cavender owns Cavender Boot City. She fears that a trusted employee has been stealing from the company. This employee receives cash from customers and also prepares the monthly bank reconciliation. To check up on the employee, Cavender prepares her own bank reconciliation, as shown. This reconciliation is both complete and accurate, based on the available data.

Requirements
1. How is the preparation of a bank reconciliation considered to be a control device?
2. Which side of the reconciliation shows the true cash balance?
3. What is Cavender€™s true cash balance?
4. Does it appear that the employee has stolen from the company?
5. If so, how much? Explain your answer.

Transcribed Image Text:

CAVENDER'S BOOT CITY Bank Reconciliation January 31, 2012 Bank Books Balance, January 31 Add: Deposit in transit $ 1,500 Balance, January 31 410 Add: Bank collection $ 1,050 790 Interest revenue 15 Less: Outstanding checks 1,080 Less: Service charge Adjusted bank balance 830 Adjusted book balance $ 1,835