Class Notes (1,100,000)
CA (630,000)
UTSC (30,000)
MGA (200)
MGAB01H3 (100)
Lecture

Cash Controls


Department
Financial Accounting
Course Code
MGAB01H3
Professor
Liang Chen

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Cash Controls
Internal Control over Cash Receipts
¾ Over-the-counter Receipts: $OOVDOHVDUH³UXQJXS´DQGWKHFRUUHFWDPRXQWLVFOHDUO\
visible to the customer. This is to ensure that the cashier does not enter a lower
amount and pocket the difference. All sales are further recorded in a cash register tape
and is locked until it is removed by a supervisor at the end of the day to compare the
sales and the amount in the cash register. The findings are reported on a cash count
sheet and signed by the cashier and supervisor. These cash count sheets are then
IRUZDUGHGWRWKHDFFRXQWLQJGHSDUWPHQWDQGWKHQWRWKHFRPSWUROOHVRIILFHWR
compare with the daily bank deposit. All cash sales are normally deposited into banks
accounts.
¾ Mail Receipts: These receipts are usually in the form of cheques. They are frequently
accompanied by a remittance advice that states the purpose of the cheque. Each
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This restrictive endorsement reduces the likelihood that the cheque will be diverted to
personal use.
Internal Control over Cash Disbursements
¾ Generally, internal control over cash disbursements is more effective when payments
are made by cheque, rather than by cash.
¾ Petty Cash Fund: is a cash fund that is used to pay relatively small amounts, while
still maintaining satisfactory control. The petty cash fund is usually operated on an
imprest system.
¾ Establishing the Fund: Dr Petty Cash, Cr Cash. No other entries should affect the
Petty Cash account unless it is to change the amount of the fund.
¾ Making Payments from the Fund: The custodian of the petty cash fund has the
authority to make payments from the fund that conforms to prescribed management
policies. Each payment from the fund must be documented on a prenumbered petty
cash receipt. The sum of the petty cash receipts and money in the fund should equal
the established total at all times.
¾ Replenishing the Fund: To replenish the fund, the petty cash receipts are sent to the
FRPSWUROOHVRIILFHZKHUH they verify the transactions and balance of the fund. The
accounting entries would affect purchases of assets or expenses and a Cr to cash, the
totalled amount of the petty cash receipts, which is also the amount needed to restore
the balance of the fund to its original balance. Sometimes, there may be shortages or
overage. To compensate for this, the amount Cash over and short is used to record
the difference.
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