Your Assignment, Part IYou have recently been approached by the owners of Scrimshaw Advertising about some serious problems that they have found after their office manager abruptly left the company one month ago. "We didn't have a committed accounting department," Mrs. Scrimshaw explains. "We outsourced our payroll and had an accounting firm handle our taxes each year, but we let our office manager deal with the rest. She had some experience as an accountant before she came to work here, so we felt that she could handle the extra duties."

"Well, what went wrong?" you ask.

"Everything you can think of!" Mrs. Scrimshaw says. "First off, we took a look at the books and found that they didn't match up to the statements that the bank had sent us. I'm no accountant myself, but I glanced at the statements and found all sorts of fees and charges from the bank that had been left off the ledger. I don't understand how she could have made that oversight. Then, we looked in the cash box where we keep the money for office supplies, and it was empty! There were a few receipts in there, but they only amounted to a couple hundred dollars. There was much more petty cash in that box before she started working here."

"Have you spoken to your former office manager?" you ask Mrs. Scrimshaw.

"I have, but she doesn't seem to know what I'm talking about! She has moved out of state and started a new job, so we can't ask her to come straighten this out. We just want to get to the root of the problem and make sure that this doesn't happen again."

1. How would you explain the need for bank reconciliations to Mrs. Scrimshaw?

2. What would you tell Mrs. Scrimshaw about proving cash?

3. Explain to Mrs. Scrimshaw how important petty cash procedures are to protect a business's cash assets.

Your Assignment, Part IIAfter you have explained the importance of bank reconciliations, proving cash, and following petty cash procedures, you offer to help Mrs. Scrimshaw develop and implement a series of cash control procedures. She shows you her business's bank statements and the general ledger for the last month.

Review these materials and explain how to reconcile the bank statement and ledger as you complete the reconciliation.

Your Assignment, Part IIIYour task will now be to take the transactions that you have adjusted, and journalize and post them in the general ledger for Scrimshaw Advertising. After you have done this, make a plan for how Mrs. Scrimshaw can protect her accounts from being unbalanced again. Explain the cash control procedures you think she should implement.