Control Cash

7/23/2019 Control Cash

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3 Controlling Cash

3.1 Internal Control

Protection of assets

Compliance with company policies

Evaluation of performance

Accuracy of accounting reports3.2 Controlling cash

Controlling cash receipts

Controlling cash disbursements

an! reconciliation

an! reconciliation statement

Petty cash fund

Establishing the fund

"perating the fund

#eplenishing the fund

Cash short and over

$he voucher system

Procedures for preparing the voucher

%pecial &ournals used

Procedures for paying a voucher

'iles maintained in the voucher system

Cash control is a process that is used to verify the complete nature and accurate recording of all

cash that is received, as well as any cash disbursements that take place. As a broad principle of

responsiblefinancial accounting, this process takes place in any environment where goods and

services are bought and sold. As such, businesses, non-profit organizations and households all

employ its basic tenets.

To fully understand cash control, it is helpful to understand what is meant by cash, when it comes to

financial accounting. Along with referring to currency and coin, this term is also understood to include

forms of financial exchange likemoney orders,credit cardreceipts, and checks. Essentially, any type

of financial exchange that can be immediately negotiated for a fixed value ualifies.

!ash control means competently managing all these types of financial instruments by maintaining an

accurate tracking system that accounts for both receiving and disbursing the cash. "esigning this

process is typically not difficult, and there are a few basic elements that will be incorporated into the

process, regardless of whether the procedure is used in the home or in an office or businessenvironment.

#irst, all transactions related to cash must be documented and recorded immediately. Theaccrual

methodof accounting, in which earnings and expences are recorded when they are incurred, rather

than when they are received or paid, is not used. Each cash receipt is recorded upon reception,

while each disbursement is entered at the time that the payment is released. This mode of

documentation reuires only some basic templates that will record the necessary data. #or the
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home, a checking accountcan be used to track all cash deposited into a common account for the

good of the home, and the check book register can serve as the basic document that keeps track of

the inbound and outbound transactions.

$ext, solid procedures reuire that there be multiple, but limited, individuals who have access to the

cash, which serves two purposes. #irst, people can be held accountable for the way that the cash ismanaged. %econd, having at least two people oversee the process helps to ensure that important

transactions can take place at any time, even if one individual is unavailable for some reason.

!ash control also demands that the documents related to the task are kept separated from the

physical location of the cash. &n other words, the accounting book that is used to record the cash

transactions should not be kept in the safe with the currency, money orders, and checks. This simple

precaution helps to ensure that the task of altering the physical evidence related to cash in hand is

more difficult, and therefore minimizes the chances for theft to occur.

Control Auditon wise'EE()

*aterial collected during a uality controlauditcan be pulled together into a report.

Although not all manufacturers utilize all three types of uality controltesting, nearly all

manufacturers implement some form of uality controlauditingin the manufacturing process. &n-

house uality controltests might be something as simple as visual inspection of the product for the

correct number of pieces, correct coloration or visible damage, or this type of testing might involve a

complex series of carefully calibrated laboratory tests to determine chemical compositions and other

properties of a manufactured product.

Cash Control Procedureson wise'EE()

To fully understand cashcontrol, it is helpful to understand what is meant by cash, when it

comes to financial accounting.

After the funds are properly recorded, the cashmanagement policy will usually address

theproceduresfor allocating funds for specific purposes.

ash Reconciliationon wise'EE()

The basic idea behind cashreconciliationis to account for all cashresources and make

sure there is no uestion regarding monies received or spent during the period under consideration.

+here bank reconciliationsreview the individual transactions contained in a

companys cashaccount, the cashflow statement is a more overarching approach

to cashreconciliation.

Internal Cash Controlon wise'EE()

&n addition to these tips, avoiding company credit cards is also wise, as this helps to reduce

financial stress, which enables increased success at cashcontrol. !onducting monthly bank

reconciliations is an important cashcontroltip to follow because it allows a business to verify that

its cashis not being abused, misused, or lost.
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Also known as !#&, a cashflow return on investment is a type of valuation model that

operates with the understanding that the price of the investment is not determined based on the

performance of the entity that issued the security, but on the current status of cashflow. The idea is

that this return must exceed the internalhurdle rate of the corporation in order for the price of the

security to be both attractive to investors and lucrative for the issuer.

Cash Control Systemon wise'EE()







Cash Controlon wise'EE()







Accounting Procedureson wise'EE()

#or example, the use of generally accepted accountingprinciples /'AA01 has been

instituted in the 2nited %tates by the accountingprofession to ensure a commonality among

companies. 'enerally, accountingprocedurescover such topics as how to record financial data,

summarize financial data, prepare financial statements, and routine accountingmatters.

%imilar to regular accountingprocedures, general ledgers in escrow accountingmay use

sub-ledgers or 3ournals to record financial transactions.

Control Cash

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