Cash Controls

Module 3:
Cash, Receivables, Payables

Duration:
45-60 minutes

Level:
Beginner to Diploma-Level

➛ Explain why cash is the most vulnerable asset.

➛ Identify common risks related to cash handling.

➛ Describe internal controls used to safeguard cash.

➛ Distinguish between cash receipts and cash payments controls.

➛ Apply basic cash control procedures in a business setting.

➛ Cash
➛ Internal Control
➛ Cash Receipts
➛ Cash Payments
➛ Segregation of Duties
➛ Authorization
➛ Physical Control
➛ Fraud

Cash is
➛ Easily stolen
➛ Easily misused
➛ Difficult to trace if controls are weak

Because of this, businesses must use strong cash controls.

Internal controls are
➛ Rules
➛ Procedures
➛ Checks

They help to
➛ Protect cash
➛ Prevent errors
➛ Reduce fraud
➛ Ensure accurate records

Controls over money coming into the business include

➛ Issuing receipts for all cash received
➛ Recording cash immediately
➛ Depositing cash daily
➛ Separating cash handling from record keeping

Controls over money going out include

➛ Using cheques or electronic payments
➛ Authorizing all payments
➛ Using vouchers for expenses
➛ Keeping supporting documents | invoices, receipts

Ideally, different people should

➛ Receive cash
➛ Record transactions
➛ Reconcile bank statements

One person should not do all three.

Using a bank
➛ Reduces cash on hand
➛ Creates an independent record
➛ Helps detect errors and fraud

Match each situation with the correct control type

➛ Daily bank deposits
➛ Manager approval before payment
➛ Keeping cash in a locked safe
➛ Different staff receive and record cash

Control types
➛ Authorization
➛ Physical Control
➛ Segregation of Duties
➛ Bank Control

State the risk in each situation

➛ One employee receives cash and records it.
➛ Cash is kept overnight in an unlocked drawer.
➛ No receipts are issued for cash sales.
➛ Payments are made without approval.

Indicate whether the following is a good control or poor control

➛ Paying expenses only by cheque
➛ Allowing staff to borrow cash from the till
➛ Recording cash sales at the end of the week
➛ Depositing all cash receipts daily

A small retail shop receives most of its sales in cash. The owner allows one employee to

➛ Receive cash
➛ Record sales
➛ Keep the cash box

No receipts are issued, and cash is deposited once a week.

Questions

➛ Identify three weaknesses in the cash control system.

➛ Suggest two controls that could improve cash safety.

➛ Explain why segregation of duties is important in this case.

➛ Why is cash considered the most risky asset?

➛ What is internal control?

➛ Name one control used for cash receipts.

➛ Name one control used for cash payments.

➛ True or False | One person should handle all cash-related tasks.

---

Answers ➧ Here

---

Bank Reconciliation ➧ Here