Which Of The Following Is Not An Appropriate Internal Control For Cash Receipts Over Theã¢â‚¬â€¹ Counter?

Since cash is the almost liquid of all assets, a concern cannot survive and prosper if information technology does non have adequate control over its cash.  Cash is the asset that has the greatest take a chance of "going missing" and this is why we must ensure that nosotros accept strong internal controls build effectually the greenbacks process.  Since many business transactions involve cash, it is a vital cistron in the performance of a business organization. Of all the company'south assets, cash is the most hands mishandled either through theft or carelessness. To control and manage its cash, a company should:

• Account for all cash transactions accurately and so that correct data is bachelor regarding greenbacks flows and balances.
• Make sure that plenty cash is available to pay bills as they come due.
• Avoid holding too much idle cash considering backlog cash could be invested to generate income, such every bit interest.
• Preclude loss of greenbacks due to theft or fraud.

The demand to command greenbacks is clearly 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 avails past (i) segregating employee duties, (2) assigning specific duties to each employee, (iii) rotating employee job assignments, and (4) using mechanical devices. This video highlights the issues and controls needed when dealing with cash:

When a merchandising company sells its trade inventory, information technology may receive cash immediately or several days or weeks later. A clerk receives the cash immediately over the counter, records it, and places information technology in a greenbacks register. The presence of the customer as the auction is rung upwardly usually ensures that the cashier enters the correct corporeality of the auction in the cash annals. At the end of each day, stores reconcile the cash in each cash register with the cash register tape or computer printout for that register.

Did you know? The cheapest and easiest internal control test is by involving the public.  If a company requires all transactions exist entered in the greenbacks register, the company can do a "promotion" that will verify employees are following this.  The promotions would be like "If you lot receipt has a scarlet star on the back, get a free cookie" or "If you lot do non get a receipt, receive a costless drink".  Sound familiar?  The public is at present looking for a receipt for each transaction and will ask if they don't receive information technology.  The benefit of finding theft will outweigh the cost of giving abroad a piddling free food.

Payments received later are most always in the form of checks. Stores prepare a record of the checks received as before long as they are received. Some merchandising companies have customers send the payments directly to the bank instead of the company itself.  Although businesses vary their specific procedures for controlling greenbacks receipts, they normally observe the following principles:

• Fix a record of all cash receipts as shortly equally cash is received. Most thefts of cash occur before a tape is made of the receipt. Once a record is fabricated, information technology is easier to trace a theft.
• Deposit all cash receipts intact as presently equally feasible, preferably on the day they are received or on the next business solar day. Undeposited cash is more susceptible to misappropriation.
• Arrange duties so that the employee who handles cash receipts does not record the receipts in the accounting records. This command feature follows the general principle of segregation of duties given earlier in the chapter, every bit does the next principle.
• Adapt duties so that the employee who receives the cash does not disburse the cash. This command measure out is possible in all simply the smallest companies.

Companies also need controls over cash disbursements. Since a company spends most of its cash by check, many of the internal controls for cash disbursements bargain with checks and authorizations for greenbacks payments. The basic principle of segregation of duties also applies in controlling cash disbursements. Following are some basic control procedures for greenbacks disbursements:

• Make all disbursements by check or from piffling cash. Obtain proper approval for all disbursements and create a permanent record of each disbursement. Many retail stores make refunds for returned trade from the greenbacks annals. When this practice 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 two signatures on each bank check over a textile corporeality so that one person cannot withdraw funds from the bank account.
• Arrange duties so that the employee who authorizes payment of a neb does not sign checks. Otherwise, the checks could exist written to friends in payment of fictitious invoices.
• •equire approved documents to support all checks issued.

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• Instruct the employee authorizing cash disbursements to make certain that payment is for a legitimate purpose  is made out for the exact amount and to the proper party.
• Stamp the supporting documents paid when liabilities are paid and indicate the date and number of the check issued. These procedures lessen the take a chance of paying the aforementioned debt more than once.
• Arrange duties and then that those employees who sign checks neither have access to canceled checks nor fix the bank reconciliation. This policy makes information technology more difficult for an employee to conceal a theft.
• Have an employee who has no other cash duties prepare 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 foreclose unauthorized use.

In the next section, we discuss the bank checking account. If you have a personal checking business relationship, some of this information volition exist familiar to you.

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Which Of The Following Is Not An Appropriate Internal Control For Cash Receipts Over Theã¢â‚¬â€¹ Counter?,

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

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