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Pharoah Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep
Pharoah Company is a very profitable small business. It has not, however, given much consideration to internal control. For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs of cashier and bookkeeper. As a result, Bret Turrin handles all cash receipts, keeps the accounting records, and prepares the monthly bank reconciliations.
The balance per the bank statement on October was $ Outstanding checks were No for $ No for $ No for $ No for $ No for $ and No for $ Included with the statement was a credit memorandum of $ indicating the collection of a note receivable for Pharoah Company by the bank on October This memorandum has not been recorded by Pharoah.
The companys ledger showed one Cash account with a balance of $ The balance included undeposited cash on hand. Because of the lack of internal controls, Bret took for personal use all of the undeposited receipts in excess of $ He then prepared the following bank reconciliation in an effort to conceal his theft of cash.
Cash balance per books, October
$
Add: Outstanding checks
No
$
No
No
Less: Undeposited receipts
Unadjusted balance per bank, October
Less: Bank credit memorandum
Cash balance per bank statement, October
$PHAROAHCOMPANY
Bank Reconciliation
$
$
$
$
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