what is the journal entry for cash embezzled by an employee?
please explain the conservatism principle.
There are two below-mentioned treatments for recording embezzlement of cash by an employee.
(i) When Cash Embezzled is considered as ‘Loss’ by the firm.
In this case Journal entry is
Loss by Theft of Cash A/c | Dr. |
Or |
|
Cash Embezzlement A/c | Dr. |
To Cash A/c |
|
(Loss of cash by embezzlement) | |
(ii) When Cash Embezzled is not considered as Loss
In this case, the employee is held responsible for the amount of cash embezzled. The firm recovers the amount embezzled from the concerned employee. In this case, Journal entry is:
Employee’s Personal A/c | Dr. |
To Cash A/c |
|
| (Cash embezzled recovered from the employee ) | |