Professional Documents
Culture Documents
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- existence
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- existence - completeness
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What is kiting?
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What is kiting?
Kiting is an irregularity whereby an overstatement of cash is created by a cash transfer between bank accounts.
Copyright 2003 Pearson Education Canada Inc.
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What is kiting?
Kiting is an irregularity whereby an overstatement of cash is created by a cash transfer between bank accounts.
The deposit is recorded in cash receipts but the disbursement is not recorded in cash disbursements.
Copyright 2003 Pearson Education Canada Inc.
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Kiting example
On 12/31, Aces bookkeeper writes a $5,000 cheque on the National Bank and deposits the cheque in the Canadian Bank account.
National
Ace Co.
National
Ace Co.
12/31 5000
Canadian
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Kiting example
On 12/31, Aces bookkeeper writes a $5,000 cheque on the National Bank and deposits the cheque in the Canadian Bank account. The bookkeeper records the deposit in the cash receipts journal but does not record the cheque in the cash payments journal. He also fails to list the cheque as outstanding on the National Bank reconciliation.
cash receipts journal description _ $$ _ Dec. 31, 2004 Misc. revenue 5000 cash payments journal description _ $$ _ Dec.31, 2004 - no activity 20 - 13
Kiting example
On 12/31, Aces bookkeeper writes a $5,000 cheque on the National Bank and deposits the cheque in the Canadian Bank account. National will not be aware of the cheque until notification from Canadian, probably during the first few days of January.
National
Canadian
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Kiting example
On 12/31, Aces bookkeeper writes a $5,000 cheque on the National Bank and deposits the cheque in the Canadian Bank account. National will not be aware of the cheque until notification from Canadian, probably during the first few days of January.
National
Canadian
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On 12/31, Aces bookkeeper writes a $5,000 cheque on the National Bank and deposits the cheque in the Canadian Bank account. National will not be aware of National the cheque until notification from Canadian, probably during the first few days of January. As a result of the deposit, Canadian will increase Aces account on 12/31.
Canadian
As a consequence, the bank records will reflect a $5,000 cash overstatement for a few days until the cheque clears. December bank statements will also support this overstatement.
Copyright 2003 Pearson Education Canada Inc.
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Copyright 2003 Pearson Education Canada Inc.
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A bank cutoff statement is prepared ten business days after the balance sheet date.
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Canadian
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- whether all bank deposits have been recorded in client cash receipts records
cash receipts journal description _ $$ _ Dec. 31, 2004 Misc. revenue 5000
Canadian
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- whether all client cash payments have been paid by the bank
cash payments journal description _ $$ _ Dec. 31, 2004 Misc. expense 5000
Canadian
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- whether all bank payments have been recorded in client cash payments records
cash payments journal description _ $$ _ Dec. 31, 2004 Misc. expense 5000
Canadian
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BANK
Confirm all cash balances held by third parties, such as banks and other financial institutions.
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6461
NATIONAL BANK
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CASH
NATIONAL BANK
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NATIONAL BANK
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cash receipts journal description _ $$ _ May 23, 2004 ABC Vending 23,000
___a/r subsidiary customer _ $$ _ ABC Vending 78,660 5/23/04 payment 23,000 balance 55,660
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cash receipts journal description _ $$ _ May 23, 2004 ABC Vending 23,000 Bank Statement 5/31/04 Deposits: 5/23 $23,000
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___a/r subsidiary customer _ $$ _ ABC Vending 78,660 5/23/04 payment 23,000 balance 55,660
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cash payments journal description _ $$ _ January 23, 2004 a/p payment to MGB Corp. 4,300
a/p subsidiary vendor _ $$ _ MGB Corp 8,780 1/23/04 payment 4,300 balance 4,480
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cash payments journal description _ $$ _ January 23, 2004 a/p payment to MGB Corp. 4300 Bank Statement 1/31/04 Deposits: Payments: 1/26 $4300
a/p subsidiary vendor _ $$ _ MGB Corp 8,780 1/23/04 payment 4,300 balance 4,480
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a/p subsidiary vendor _ $$ _ MGB Corp 8,780 1/23/04 payment 4,300 balance 4,480
Ace Company
4512
1/23/04
MGB Corp.
NATIONAL BANK
4300
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