Internal Cash Control - A business cannot function without...

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A business cannot function without cash. Therefore, it is important for a company to be able to manage its cash properly and to be able to prevent losses in any way possible. A company’s internal control must be up to par in order to have accurate and reliable accounting records and to be able to safeguard its assets. There are five basic principles of cash management that a company can use to protect its assets and to enhance the accuracy and reliability of its accounting records. This paper will examine three different scenarios to determine how well they manage and protect their cash. For each scenario, it will be determined whether the company is doing its best to follow these internal control principles, or if improvement is needed. The Idaho Company has a weak system of cash control. Checks are not prenumbered and both the treasurer and the purchasing agent are authorized to issue checks. The checks are kept in an unlocked cabinet. Also, the purchasing agent is the only person that pays the bills pertaining to goods purchased, verifies invoice accuracy, and records the cash disbursements. The treasurer pays all other bills, records them, and files them. In addition, the treasurer is responsible for reconciling the company’s only account. There are a few ways the Idaho Company could improve their cash control procedures. First, all checks should be pre-numbered to provide evidence that transactions took place. This will ensure that all transactions are recorded. Signatures on the checks will show who is responsible for each transaction. The checks and all cash disbursement records should be locked up, preferably in a safe. Segregation of duties should be put on both the treasurer and the purchasing agent so that each person’s work can be evaluated. The purchasing agent should be able to pay the bills for goods purchased, but should then give all receipts to the treasurer to be
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This note was uploaded on 03/27/2012 for the course BUSINESS acc220 taught by Professor ? during the Spring '12 term at University of Phoenix.

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Internal Cash Control - A business cannot function without...

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