Cash Control
Cash is the most important asset for a company. The management of that asset can be beneficial or detrimental to a company’s success. Using the five basic principles of cash management can help a company maintain its cash status. Through the use of internal cash control principles to safeguard a company’s assets and further enhance the accuracy and reliability of the accounting records further ensure the success of a company. The principles of internal cash control are the establishment of responsibility, segregation of duties, documentation procedures, physical, mechanical, and electronic controls, independent internal verification (Kieso, Kimmel, Weygandt, 2003). Each of the following three companies: Idaho Company, Guard Dog Company, and a church all have problems with their internal cash control policies that must be addressed to prevent missing cash and inaccuracies in reporting.
The Idaho Company has one checking account and two people ' the treasurer and purchasing agent ' who are allowed to issue checks (Kieso, et. al, 2003). However, these checks are not prenumbered and the cabinet that the checks are kept in remains unlocked. The purchasing agent pays all bills related to goods for resale and is solely responsible for determining that the goods have been received and that the invoice is accurate. After paid, the invoices are filed by vendor and recorded in the journal. All other bills are paid by the treasure after various employees authorize it. The treasurer then stamps the invoice “paid” and files it by payment date and records it in the journal. The treasurer is responsible for reconciliation of the account (Kieso, et. al, 2003).
There are several weaknesses within the Idaho Company’s cash disbursement policies. The checks are allowed to be kept in an unlocked cabinet which can give access to anyone. The checks are not prenumbered which means checks can have the same number, can be numbered differently, or can even be replaced with fake checks...
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