Answer question & respond two other postings

First Answer question & then respond to two posts:

 

Snake Creek Company has one trusted employee who, as the owner said, handles all of the book-keeping and paperwork for the company. This employee is responsible for counting, verifying, and recording cash receipts and payments, making the weekly bank deposit, preparing checks for major expenditures (signed by the owner), making small expenditures from the cash register for daily expenses, and collecting accounts receivable. The owners asked the local bank for a $ 20,000 loan. The bank asked that an audit be performed covering the year just ended. The independent auditor ( a local CPA), in a private conference with the owner, presented some evidence of the following activities of the trusted employee during the past year:

a. Cash sales sometimes were not entered in the cash register, and the trusted employee pocketed approximately $ 50 per month.
b. Cash taken from the cash register ( and pocketed by the trusted employee) was replaced with expense memos with fictitious signatures ( approximately $ 12 per day).
c. $ 300 collected on an account receivable from a valued out- of- town customer was pocketed by the trusted employee and was covered by making a $ 300 entry as a debit to Sales Returns and a credit to Accounts Receivable.
d. $ 800 collected on an account receivable from a local customer was pocketed by the trusted employee and was covered by making an $ 800 entry as a debit to Sales Discounts and a credit to Accounts Receivable.

Required:

1. What was the approximate amount stolen during the past year?
TIP: Assume employees work 5 days a week, 52 weeks a year.
2. What would be your recommendations to the owner?

 

 

 

RESPOND TO THESE TWO POSTS as well:

 

50 x 12 = 600

 

12 x 5=60  60x 52 = 3120

 

300 + 800 = 1100

 

1100 + 3120 +600 = 4820

 

The total stolen for the year was $4820.

 

I would tell the owner that the employee has been stealing money.  I would tell him that he stole $12 a day, $1100 of the Accounts Receivable Money and the $50 a month.   I would advise that the employee be terminated.  He is almost stealing 1/4 of the money that he wants to borrow and it would not be good representation for the bank.  He would also suggest that he have an outside source review the books twice a year.  I would also advise him report the money stolen as stolen and do not misrepresent the lost as discounts. It could be used as evidence if he decided to file charges.  Make the employee aware that he knows that he/she was stealing money and that charges will/will not be filed.

 

 

AND

 

According to my calculations in the amount stolen in the last year was $4820.00.  My suggestion to the owner would be to not stop at the last year and continue going through the records for the business.  It doesn’t say how long this employee has worked for the company but if it has been 10 years and the employee steals about the same each year said employee has pocketed over $50,000.00.  I feel that with businesses there needs to be more then one person looking over the books.  If there are partners in the business each partner needs to look at the books because people are crooked.  In this case it was an employee in charge of the books and in that case I think the owner or an owner if more then one needed to take a look at the books every once in a while.