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Accounting: Internal Cash Control - Essay Example

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Accounting: Internal Cash Control

These modifications in our company’s policy with regard to internal cash control shall help us keep track of our most liquid asset. Firstly, it is recommended that checks should only be signed by the treasurer. Duties should be segregated so that the purchasing agent should only be given the responsibility to approve arrival of goods. Payment and record keeping should be done by the treasurer. Secondly, the company should purchase a new check writer which will enable them to use only prenumbered checks. This will help the company to shift from manual processes to automated processing. Lastly, a safe should be provided where all blank checks are stored and access should only be provided to the treasurer or whoever, is entitled to sign checks. If you have any queries or comments, please let me know or setup a meeting to discuss the issues in detail. P4-1A Guard Dog Company has brought stringent changes to their system which will help them use their cash well and avoid any mistakes in cash disbursements. Guard Dog has applied the following principles in their attempt to strengthen their internal cash control for cash disbursements....
Each month the bank statement is reconciled with the bank balance per books by the assistant chief. Fourthly, the company has applied ‘segregation of duties’ principle as well. According to this principle, different individuals approve and make payments. In this case, the invoice should be approved by Jane Bell, the purchasing agent, and Dennis Kurt, the receiving department supervisor. After the approval is given, the checks would be written by either the treasurer or his assistant. This will help them minimize the potential for theft. Fifthly, a principle that is essential to strengthen cash control is the application of ‘Physical, mechanical and Electronic Controls’. This principle requires the company to store blank checks in safes with limited access (Harrison, 2008). The company has obeyed to this principle by storing all blank checks in a safe in the treasurer’s office. The combination to the safe is known by the treasurer or the assistant treasurer. Lastly, another principle that the company has followed is ‘other controls’. It requires the company to stamp invoices as PAID. The company has established a process flow that which requires that after check is signed, the signer should stamp the invoice as ‘paid’ and insert it within the stamp, the date; check number and amount of the check. P4-2A A) 1) Responsibility is not established in transiting cash receipts from one place to another. 2) Cash should be deposited on the same day in the bank. 3) Trusting people to take cash from one place to another can be harmful. 4) Checks payable to ‘cash’ should be prohibited. B) For Usher Trusting people can be hazardous for the company as chances of theft rises. Ushers cannot be held ...Show more

Summary

After a thorough study of our cash disbursement mechanism, I have come up with the following recommendations. These modifications in our company’s policy with regard to internal cash control shall help us keep track of our most liquid asset. …
Author : lawson26
Accounting: Internal Cash Control essay example
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