Which Of The Following Is The Basic Internal Control Procedure With Respect To Cashã¢â‚¬â€¹ Receipts?

Since cash is the nigh liquid of all avails, a business organisation cannot survive and prosper if it does non have acceptable control over its greenbacks.  Greenbacks is the asset that has the greatest chance of "going missing" and this is why we must ensure that we have strong internal controls build around the cash process.  Since many business transactions involve cash, information technology is a vital factor in the performance of a business. Of all the visitor's assets, cash is the near hands mishandled either through theft or carelessness. To control and manage its greenbacks, a company should:

• Account for all cash transactions accurately so that correct information is available regarding cash flows and balances.
• Brand certain that enough cash is available to pay bills as they come up due.
• Avert holding too much idle greenbacks because backlog cash could be invested to generate income, such as interest.
• Foreclose loss of cash due to theft or fraud.

The demand to command cash is conspicuously evident and has many aspects. Without the proper timing of greenbacks flows and the protection of idle cash, a business cannot survive.

Companies protect their assets by (ane) segregating employee duties, (two) assigning specific duties to each employee, (3) rotating employee job assignments, and (4) using mechanical devices. This video highlights the problems and controls needed when dealing with cash:

When a merchandising company sells its merchandise inventory, it may receive cash immediately or several days or weeks subsequently. A clerk receives the cash immediately over the counter, records it, and places it in a cash register. The presence of the customer every bit the auction is rung upwardly usually ensures that the cashier enters the correct amount of the sale in the cash register. At the finish of each mean solar day, stores reconcile the cash in each greenbacks register with the cash register tape or computer printout for that register.

Did you lot know? The cheapest and easiest internal control test is by involving the public.  If a company requires all transactions be entered in the cash annals, the visitor tin can do a "promotion" that will verify employees are post-obit this.  The promotions would be like "If you receipt has a cherry star on the back, get a free cookie" or "If y'all do non get a receipt, receive a free potable".  Sound familiar?  The public is now looking for a receipt for each transaction and volition ask if they don't receive it.  The benefit of finding theft will outweigh the cost of giving abroad a petty complimentary food.

Payments received later on are most always in the form of checks. Stores set up a record of the checks received as soon as they are received. Some merchandising companies have customers send the payments straight to the bank instead of the visitor itself.  Although businesses vary their specific procedures for controlling cash receipts, they usually observe the post-obit principles:

• Prepare a record of all cash receipts as soon as cash is received. Well-nigh thefts of cash occur earlier a record is made of the receipt. Once a tape is made, information technology is easier to trace a theft.
• Deposit all cash receipts intact every bit soon as feasible, preferably on the day they are received or on the side by side business mean solar day. Undeposited cash is more than susceptible to misappropriation.
• Suit duties and then that the employee who handles cash receipts does not record the receipts in the accounting records. This command characteristic follows the full general principle of segregation of duties given earlier in the chapter, as does the side by side principle.
• Adapt duties and then that the employee who receives the greenbacks does non disburse the cash. This control mensurate is possible in all simply the smallest companies.

Companies also demand controls over cash disbursements. Since a visitor spends about of its cash by bank check, many of the internal controls for cash disbursements bargain with checks and authorizations for greenbacks payments. The basic principle of segregation of duties likewise applies in decision-making cash disbursements. Following are some basic control procedures for cash disbursements:

• Make all disbursements by bank check or from petty cash. Obtain proper blessing for all disbursements and create a permanent record of each disbursement. Many retail stores make refunds for returned merchandise from the cash register. When this practise is followed, clerks should have refund tickets approved by a supervisor before refunding cash.
• Crave all checks to be serially numbered and limit access to checks to employees authorized to write checks.
• Require 2 signatures on each cheque over a material corporeality so that ane person cannot withdraw funds from the bank account.
• Arrange duties then that the employee who authorizes payment of a bill does non sign checks. Otherwise, the checks could be written to friends in payment of fictitious invoices.
• •equire canonical documents to support all checks issued.

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• Instruct the employee authorizing greenbacks disbursements to brand certain that payment is for a legitimate purpose  is made out for the verbal amount and to the proper party.
• Postage the supporting documents paid when liabilities are paid and indicate the date and number of the bank check issued. These procedures lessen the hazard of paying the same debt more than once.
• Arrange duties and so that those employees who sign checks neither have access to canceled checks nor prepare the banking concern reconciliation. This policy makes it more hard for an employee to conceal a theft.
• Have an employee who has no other greenbacks duties ready the bank reconciliation each month, so that errors and shortages can be discovered quickly.
• Void all checks incorrectly prepared. Marker these checks void and retain them to prevent unauthorized use.

In the next section, nosotros hash out the depository financial institution checking business relationship. If you have a personal checking account, some of this data will be familiar to you.

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Which Of The Following Is The Basic Internal Control Procedure With Respect To Cashã¢â‚¬â€¹ Receipts?,

Source: https://courses.lumenlearning.com/sac-finaccounting/chapter/cash-receipts-and-disbursements/

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