What is the internal control of cash sales and collectors?
Cash collected
Keep cash/checks in a locked and secure area until they can be deposited. Access to the area should be restricted to only designated individuals. If a person with custody responsibilities leaves their position, any keys should be collected or combinations changed.
- Access to cash must be limited. All funds should be kept secure at all times. ...
- Cash operations must be subject to daily supervisory review. ...
- All cash must be completely and accurately recorded in the financial records of the College.
Internal Controls for Sales Class of Transactions
An internal control pertaining to the occurrence assertion is that each sales transaction is supported by the necessary documents, such as the approved sales order, shipping documents, and invoice.
Answer and Explanation:
A basic internal control procedure is to deposit all cash receipts in the bank shortly after the cash is received. It is common for company's to deposit cash receipts on a daily basis.
- Stewardship. The careful and responsible management of something entrusted to one's care. ...
- Accountability. One person has sole responsibility for a fund. ...
- Separation of Duties. ...
- Physical Security. ...
- Reconciliation.
- Confirm cash balances.
- Vouch reconciling items to the subsequent month's bank statement.
- Ask if all bank accounts are included on the general ledger.
- Inspect final deposits and disbursem*nts for proper cutoff.
The primary goal of internal control over cash collection function is to minimize the amount of cash a firm must hold in order to carry out its normal business activities on one side, and on the other, to obtain sufficient cash funds that would enable the firm to take trade discounts, to maintain its credit rating and ...
The objectives of internal controls for cash disbursem*nts are to ensure that cash is disbursed only upon proper authorization of management, for valid business purposes, and that all disbursem*nts are properly recorded.
Accordingly, it is not part of sound internal control for cash to have the same individual receives the cash and pays the bills. So, the correct answer is option B. The same individual receives the cash and pays the bills.
What are the five internal controls?
Determining whether a particular internal control system is effective is a judgement resulting from an assessment of whether the five components - Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring - are present and functioning.
- Control Environment.
- Risk Assessment.
- Control Activities.
- Information and Communication.
- Monitoring.
There are five interrelated components of an internal control framework: control environment, risk assessment, control activities, information and communication, and monitoring.
Since cash is the most liquid of all assets, a business cannot survive and prosper if it does not have adequate control over its cash. Cash is the asset that has the greatest chance of “going missing” and this is why we must ensure that we have strong internal controls build around the cash process.
The best internal control over cash payments is to ensure checks are serially numbered and signed only by authorized employees.
Proof of Cash
For revenue, you want to compare cash deposits each month for all bank accounts to the corresponding revenue. There are numerous reconciling items that need to be considered – including changes in accounts receivable or unbilled receivables as well as changes in deferred revenue, if any.
There are four internal control measures for cash. They are employee background checks, use of written protocols, separation of duties, and securing assets and cash in safe locations.
Cash is a liquid, portable, and desirable asset. Therefore, a company must have adequate controls to prevent theft or other misuses of cash. These control activities include segregation of duties, proper authorization, adequate documents and records, physical controls, and independent checks on performance.
- No cash should be left unattended. ...
- All cash must be stored in the safe.
- No cash should enter or exit the safe without being counted.
- Only one manager should have the key to the safe during a shift. ...
- The safe should never be left open or unlocked.
Cash reconciliation can be broken down into five individual steps: Gather financial documents (sales receipts), calculate and compare balances, identify and investigate discrepancies, adjust records and document reconciliation.
How would an auditor verify cash sales?
Cash sales :- In vouching cash sales , cash register should be fully checked with carbon copies of cash memos . The auditor should verify the daily deposits of cash received in the bank.
The auditor will test for cash balances reflected on the client's balance sheet by applying two primary tests: Bank reconciliations – Bank reconciliations are used when testing for the various mentioned management assertions.
- Limit cash access to only designated employees.
- Document all transactions, including receipts and refunds.
- Review and validate the documentation within 24 hours.
- Have one employee collect and deposit cash and have a second employee reconcile accounts.
- Maintain a thorough log of cash receipts.
To control cash transactions, organizations should adopt some of the following practices: Require background checks for employees, establish segregation of duties, safeguard all cash and assets in secure locations, and use a lockbox to accept cash payments from customers.
- Emphasize physical security to those who handle cash and checks.
- Restrict access to cash and checks to as few individuals as possible.
- Count cash in a non-public area, with more than one individual present, when possible.
- Deposit cash and checks daily. ...
- Eliminate cash and checks held overnight.
