Cash controls

Cash controls

1. °Cash: most susceptible asset for diversion and use

2. Management faces two problems for cash transactions

   • Establish control to prevent unauthorized transactions
   • Provide all the information that is needed to manage cash and transactions

3. To make sure everything is going right, companies need effective internal control over cash.

4. For control objectives, the company can have many type of bank accounts

5. Multilocation companies commonly use lockbox accounts

   • Company rents a box and the bank pick up the remittances

6. °General checking account: account in which companies deposit and disburse. Principal bank account.

7. °Imprest bank account: account in which the company has a specific amount for limited use.

   • Such as: payroll checks, bonuses, dividends, comissions, confidential and travel expenses.

8. Imprest petty cash system

   • ° Designate a custodian, he/she will save the amount for limited expenses. °Custodian will save signed receipts from payments. ° When there is no money, custodian will have to ask for a reimbursement and receive a check to replenish the fund.
   • °If company decides that the amount is too much, it can lower. Company has to make journal entries to reflect changes on the amount.

9. For an effective control of cash, campanies must have a physical protection of cash. It means to have a locked cash drawer or whatever companies decided to.

10. At the end of the month, bank will give each customer a bank statement.

    • Also provide a bank reconciliation, that is a registry in which records from the bank and company are compared

Images and files in the map