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What Is Kiting

Kiting is an irregularity where an overstatement of cash is created by transferring funds between bank accounts. It involves recording a deposit in one bank's cash receipts while not recording the corresponding withdrawal from the other bank. This results in inflated cash balances in the financial records for a period of time until the transfers clear between the banks.

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Wawex Davis
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189 views

What Is Kiting

Kiting is an irregularity where an overstatement of cash is created by transferring funds between bank accounts. It involves recording a deposit in one bank's cash receipts while not recording the corresponding withdrawal from the other bank. This results in inflated cash balances in the financial records for a period of time until the transfers clear between the banks.

Uploaded by

Wawex Davis
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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What is kiting?

What is kiting?
Kiting is an irregularity whereby
an overstatement of cash is cre-
ated by a cash transfer between
bank accounts.
What is kiting?
Kiting is an irregularity whereby
an overstatement of cash is cre-
ated by a cash transfer between
bank accounts.
The deposit is
recorded in cash receipts but
the disbursement is not re-
corded in cash disbursements.
Kiting example
On 12/31, Ace’s bookkeeper writes a $5,000 cheque
on the National Bank and deposits the cheque
in the Canadian Bank account.

National Ace Co. 12/31 Canadian


Ace Co. 5000
National
Kiting example
On 12/31, Ace’s 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 cash payments journal


description _ $$ _ description _ $$ _
Dec. 31, 2004 Dec.31, 2004
Misc. revenue 5000 - no activity -
Kiting example
On 12/31, Ace’s 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.

Canadian
Kiting example
On 12/31, Ace’s 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


Canadian will increase Ace’s
account on 12/31.
On 12/31, Ace’s 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 Canadian


will increase Ace’s account on 12/31.

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.

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