CashDisbursement ReceiptControls
Another interesting topic is cash disbursement and receipts controls. Since cash is the most desirable asset and more susceptible to fraud, companies apply internal control principles in handling, recording, receiving or mailing the cash. As we explained before all internal control principles need to be applied in cash receipts and cash disbursements:
Establishment of responsibility
Segregation of duties
Documentation procedures
Physical controls
Independent internal verification
Human resources controls.
The most common activity in cash receipts controls is over-the-counter-receipts. The correct procedure is the following: The clerk rings up on a cash sale, and the amount is visible to the customer. The clerk gives the customer a slip for the purchase of the good, and a tape is recording all sales made throughout the day. At the end of the shift a supervisor retrieves the tape and sends it to the accounting department for a journal entry. The clerk counts the money and sends it to the cashier. The cashier sends the money to the bank with a deposit slip attached and also sends a duplicate of the slip to the accounting department.
This is the correct procedure for over-the-counter receipts; and even when companies vary in their procedures, all internal control principles are always followed. In the case described previously; segregation of duties, record keeping and independent internal controls are key elements to avoid any possibility of fraud. Another activity for cash receipts is mailing cash. When receipts are received by mail, they should be opened in the presence of two clerks, and “for deposit only” should be endorsed in the check to avoid fraud. Usually, one person handles the cash and the other makes the recording. Cash disbursement are handled quite different but also applying same principles of internal control. Generally disbursements are made in the form of check instead of cash, with exceptions of petty cash transactions.
Establishment of responsibility
Segregation of duties
Documentation procedures
Physical controls
Independent internal verification
Human resources controls.
The most common activity in cash receipts controls is over-the-counter-receipts. The correct procedure is the following: The clerk rings up on a cash sale, and the amount is visible to the customer. The clerk gives the customer a slip for the purchase of the good, and a tape is recording all sales made throughout the day. At the end of the shift a supervisor retrieves the tape and sends it to the accounting department for a journal entry. The clerk counts the money and sends it to the cashier. The cashier sends the money to the bank with a deposit slip attached and also sends a duplicate of the slip to the accounting department.
This is the correct procedure for over-the-counter receipts; and even when companies vary in their procedures, all internal control principles are always followed. In the case described previously; segregation of duties, record keeping and independent internal controls are key elements to avoid any possibility of fraud. Another activity for cash receipts is mailing cash. When receipts are received by mail, they should be opened in the presence of two clerks, and “for deposit only” should be endorsed in the check to avoid fraud. Usually, one person handles the cash and the other makes the recording. Cash disbursement are handled quite different but also applying same principles of internal control. Generally disbursements are made in the form of check instead of cash, with exceptions of petty cash transactions.