- This topic has 5 replies, 2 voices, and was last updated 14 years ago by
.
- Posts
We are challenged by our teacher to figure and explain out what this accountant is doing and how is he conducting this fraud. Please use double entries too easily explain the fraud. Its Question 25 from BPP and here is the Fraud:
“The purchase ledger clerk of Painswick Ltd has been channeling paymentsto suppliers in to his own bank account by altering bank account details of the relevant suppliers on the BACS masterfile. In order to disguise this activity the purchase ledger clerk has:
— Posted the relevant invoices to the purchase ledger twice. One entry has been made correctly to the relevant expense account whilst the other has been made to a suspense account.
— Matched and removed the duplicate invoices and payments before the monthly reconciliation of supplier accounts is performed. “This is the Fraud, can’t figure out what the hell is happening here, except for the fact that he changed the suppliers’ bank accounts to his own accounts in Painswick’s BACS masterfile so that the payments made to the supplier go to his account. I maybe wrong, but still can’t figure out the latter stuff…..WHAT the hell is going on here?
I guess that the fact that the purchase ledger clerk has matched and removed duplicate invoices is also a fraud as he does so only before monthly reconciliation is done.
He accounts invoices twice, say an invoice of USD 10,000.
dr profit and loss 10000
cr bank 10000dr suspense 10000
cr bank 10000One 10000 will go to the supplier and the other 10000 to the clerk bank account.
I just said what i thought, correct me if im wrong.Correct!!
But one point though.If he has changed the bank account from the supplier’s to his own in the BACS system, how is the normal payment made to the supplier? Shouldn’t both payments go to the accountant’s bank account? :S
I think I got it 😀
Here are the steps:1) Record two invoices of $10,000 each, leading to payables of $20,000, making the credit side of trial balance heavy by this $20,000.
2) DR Profit/loss $10,000
CR Bank $10,0003) Change the bank account no. of supplier in BACS to his own account.
4) DR Suspense $10000
CR Bank $100005) Invoices matched with the accounts and removed.
Correct me if I am wrong
Yes thats right.Please give me a feedback after explanation by your teacher for the challenge
Here is the Answer
DR Purchase(expense) 100
DR Suspense 100
CR Supplier 200Then, the payment:
DR Supplier 200
CR Bank 200While matching, he removes the duplicate invoice and after that when the new invoice comes he records that in the place of the Suspense a/c. This is a recurring fraud and will continue until the accountant decides to run away.
- You must be logged in to reply to this topic.