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In the early 2000's Congress passed a law that required an internal control environment to be created for any corporation with publicly traded stock. The

In the early 2000's Congress passed a law that required an internal control "environment" to be created for any corporation with publicly traded stock.

The law further requires all executives (CEO, CFO, COO, et. al.) to be personally liable for the adequacy of controls that prevent fraud and accounting errors. One of these internal controls is a procedure called "verification". In the case of cash, that means comparing the book records to the bank balances. This is called a bank reconciliation.

Please review the attached narrated .ppt file and then attempt this bank reconciliation exercise:

How much cash does Smith actually have at September?

  • Harry Smith has just received the monthly bank statement at September 30 from City National Bank, and the statement shows an ending balance of $545.
  • Smiths Cash account shows a September 30 cash balance of $1,823
  • Listed on the statement are an EFT rent collection of $325, a service charge of $8, two NSF checks totaling $125, and a $10 charge for printed checks.
  • In reviewing his cash records, Smith identifies outstanding checks totaling $609 and a September 30 deposit in transit of $1,790. During September, he recorded a $310 check for the salary of a part-time employee as $31..

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