Cash Controls

Match each situation with the correct control type

Daily bank deposits
➛ Bank Control

Manager approval before payment
➛ Authorization

Keeping cash in a locked safe
➛ Physical Control

Different staff receive and record cash
➛ Segregation of Duties

State the risk in each situation

One employee receives cash and records it.
➛ Risk of fraud or theft due to no segregation of duties.

Cash is kept overnight in an unlocked drawer.
➛ Risk of theft due to lack of physical control.

No receipts are issued for cash sales.
➛ Risk of unrecorded sales and cash misappropriation.

Payments are made without approval.
➛ Risk of unauthorized or unnecessary payments.

Indicate whether the following is a good control or poor control

Paying expenses only by cheque
➛ Good Control

Allowing staff to borrow cash from the till
➛ Poor Control

Recording cash sales at the end of the week
➛ Poor Control

Depositing all cash receipts daily
➛ Good Control

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.
➛ One person handles receiving, recording, and keeping cash.
➛ No receipts issued for cash sales.
➛ Cash is deposited only once a week.

Suggest two controls that could improve cash safety.
➛ Issue receipts for all cash sales.
➛ Separate cash handling and record keeping.
➛ Deposit cash daily.
➛ Use a locked cash box or safe.
Any two earn full marks

Explain why segregation of duties is important in this case.
➛ It reduces the risk of fraud and errors by ensuring no single person controls all aspects of cash handling.

Why is cash considered the most risky asset?
➛ Because it is easy to steal and misuse.

What is internal control?
➛ Policies and procedures used to safeguard assets and ensure accurate records.

Name one control used for cash receipts.
➛ Issuing receipts / Daily bank deposits.

Name one control used for cash payments.
➛ Authorization / Payment by cheque.

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

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