CONTROL OVER CASH

Cash is the most valuable assets of an organization. However, it is prone to theif, emblezzlement, mismanagement and shortages especially when it is needed to settle expenses and expenditure.

Cash include: physical cash at hand, money in the bank account and other short term securities that can be easily and readily converted to cash.

There is a saying that you can not trust a man with cash. Therefore, adequate internal control must be put in place to control cash.

INTERNAL CONTROL OVER CASH

The following objectives should be considered a good control over cash:

(i) A good internal control must avoid losses of cash from fraud or theft.

(ii) A good internal control must protect employees from suspicion and harassment that result from shortages and thief of cash.

(ii) A good internal control must provide accurate and reliable accounting for cash.

(ii) A good internal control should ensure management to have reliable and sufficient amount of cash at all times.

(iii)  A good internal control will set limits to the amount of cash available in the cash vault and any excess cash should be invested in profitable ventures.

HOW TO HANDLE CASH

Accounding to an accounting textbook published by Accounting Technician Scheme West Africa (ATSWA), in order to have good internal control over cash, the following steps should be taken in handling cash:

(i) Cash must be deposited daily in the bank.

(ii) All payments (except for petty cash transaction) should be made by cheques.

(iii) The function of receiving cash should be separated from that of maintaining records of cash. Each function should be performed by different persons.

(iv) All cash receipts must be recorded in a cash register. At the end of each day the amount in the register should be compared with the physical cash.

(v) All payments must be checked and approved in writing by responsible officers before payments are made.

(vi) The function of approving payment must be separated from the function of signing cheques.

(vii) Carbonized receipts must be issued for all cash sales and cash received.

(viii) When payment is made for a transaction the invoice and other supporting documents relating to that transaction should be stamped paid with date so that payment will not be made for a transaction twice.

Further Reading:

Financial and non financial information.

Debenture as a source of finance.

What internal control can do for your business.

Five things to put in mind for your savings to work.

How to finance an household.