Cash Internal Control

ARVI MARIE S. CALONZO
BSA 4B

Applications of Internal Control to Cash Receipts

---Cash receipts may result from cash sales; collections on account from customers; the receipt of interest, rents, and dividends; investments by owners; bank loans; and proceeds from the sale of noncurrent assets. ---The following internal control principles explained earlier apply to cash receipts transactions as shown:  Establishment of responsibility - Only designated personnel (cashiers) are authorized to handle cash receipts.  Segregation of duties - Different individuals receive cash, record cash receipts, and hold the cash.  Documentation procedures - Use remittance advice (mail receipts), cash register tapes, and deposit slips.  Physical, mechanical, and electronic controls - Store cash in safes and bank vaults; limit access to storage areas; use cash registers.  Independent internal verification - Supervisors count cash receipts daily; treasurer compares total receipts to bank deposits daily.  Other controls - Bond personnel who handle cash; require vacations; deposit all cash in bank daily. Applications of Internal Control to Cash Disbursements

---Cash is disbursed to pay expenses and liabilities or to purchase assets.

---Internal control over cash disbursements is more effective when payments are made by check, rather than by cash, except for incidental amounts that are paid out of petty cash.

---Cash payments are generally made only after specific control procedures have been followed.

---The paid check provides proof of payment.

--- The principles of internal control apply to cash disbursements as follows:
 Establishment of responsibility - Only designated personnel (treasurer) are authorized to sign checks.
 Segregation of duties - Different individuals approve and make payments; check signers do not record disbursements.
 Documentation procedures - Use prenumbered checks and