Hi Ms 500:

What is kiting?

It is a form of fraud that causes cash to be overstated by having it in two or more bank accounts simultaneously. The bank accounts referred to are the clients cash book and not the accounts present at the bank and may be in different locations.

Let us determine where overstatements can be as at december 31, 2001 assuming these are the only transactions that took place.

Let us assume that Disbursement cash book has cash =300 at dec 29, 2001 and we write 100.00 dollar checks on dec 30, 2001

case check 101

disbursement bank account == 300-100 ==200 at dec 31, 2001 because recording was made on Dec 30

Amount that should be there on Dec 31 == 200

Appears to be fine

Case check 202

disbursement bank account == 300.00 no recording as yet until Jan 3

Amount that should have been there on dec 31 == 200.00

Cash appears to be in both disbursement account and receipt account if we are to follow the bank statement on the receipt side

there is an overstatement here

Check case 303

disbursement bank account == 300-100 == 200 since recording has been made on Dec 31

Amount should have been  200 at Dec 31

This appears to be fine

Check case 404

disbursement bank account at Dec 31 == 300 no recording until jan 2

Amount should have been 300-100 had recording of disbursement  been made.

Amount appears to be in both disbursement and receipt account if we are to follow the deposit in the receipt BANK statement

There appears to be an error here

Errors appear to be on check 202 an 404. In these two cases an additional 100 needs to be recorded in the subsidiary bank account for Dec 31 since they were already at the bank. when the bank reconciliation is done the clerk will notice these deposits in the account in december and he will have to account for them in the clients bank records -- this is a bit of FAR here

Hope this helps