Sally’s Sweet Shop’s August 31, 2014, bank balance was $11,135. Th e company’s cash balance at August 31 was $10,760. Other information follows:

1. Outstanding cheques were #421 for $160, #485 for $267, #492 for $175, and #494 for $1,173. Cheque #421 was also outstanding on July 31 and was included on July’s bank reconciliation.
2. Included with the statement were EFT deposits totalling $1,750 during August in payment of accounts receivable. These deposits have not been recorded by the company.
3. Cheque #490 was correctly written and paid by the bank for $509. Th e cheque had been issued to pay accounts payable and the company had recorded it as $599.
4. The bank statement showed a cheque #4832 for $800, which did not appear on the company’s books. Investigation revealed that the cheque was actually issued by Wally’s Water Works and was charged to Sally’s Sweet Shop’s account in error.

5. The bank returned an NSF cheque from a customer for $385.
6. The bank statement showed two debit memoranda for service charges: one for $20 related to the NSF cheque (see item [5] above) and one for $40 for cheque printing charges.
7. The company’s records showed the August 15 deposit as $3,680. On the bank statement, it was correctly recorded as $3,980. The deposit was for cash sales.
8. The company has a pre-authorized EFT payment for its monthly utilities for $250 scheduled for the last day of each month. As August 31 was a Sunday this year, the bank posted it on September 1. The company recorded it in August.
9. Th e $1,370 July 31 bank deposit was recorded on August 1 on the bank statement. Th e August 31 bank deposit of $2,545 was not included on the August bank statement.

Instructions
(a) Prepare a bank reconciliation.
(b) Prepare any necessary adjusting journal entries.
(c) What amount should be reported as cash in the August 31 balance sheet?

Why is it important that the person who prepares the bank reconciliation isn’t also able to write and sign cheques? In what ways would that increase the opportunity for employee fraud?