S5-8. (Learning Objective 3: Using a bank reconciliation as a control device) Jessica Smith manages Jones Advertising. Smith 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, Smith prepares her own bank reconciliation, as follows:

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?

Transcribed Image Text:

A1 Jones Advertising Bank Reconciliation October 31, 20X7 Bank 3 Balance, October 31 4 Add: 1234567 7 Deposit in transit Less: 8 Outstanding checks 9 Adjusted bank balance 10 Books $ 3,920 $ 4,600 Balance, October 31 800 Add: Bank collections Less: Interest revenue (900) Service charge 1,100 20 (40) $ 4,500 Adjusted book balance $ 5,000