7.2 Cash Control

Question 1

Examples of EFT Transactions

Answer 1

1. debit and credit card transactions
2. pre-authorized debits
3. electronic bill payments using online banking bank
4. machine withdrawals
5. prepaid smart cards

Question 2

Good Control of Cheques

Answer 2

1. Having them signed by at least two authorized people.
2. Should be clear segregation of duties between the cheque-signing function and the accounts payable function.
3. Should be pre-numbered, and all cheque numbers must be accounted for in the payment and recording process
4. Should never be pre-signed, and blank (unissued)

Question 3

Good Control of Electronic Payments

Answer 3

They have proper authorization and segregation of duties.

EFT payments also reduce the extra costs of making payments by cheques, such as:

1. Postage
2. Envelope costs

Question 4

Debit Cards vs Credit Cards Recording

Answer 4

1. Debit cards = recorded as cash sales, less the service charge.
2. Bank credit cards = recorded as cash sales, less the service charge.

Question 5

Non-Bank Credit Card Recording

Answer 5

Non-bank credit cards = recorded as receivables

There is no bank service charge when a customer uses a company credit card.

Question 6

Cash Receipt Internal Controls

Answer 6

1. Designating only personnel such as cashiers to handle cash
2. Assigning the duties of handling or receiving cash, and recording cash to different individuals
3. Using remittance advices for mail receipts, cash register tapes (or point‐of‐sale computerized systems) for over‐the‐counter receipts, and deposit slips for bank deposits
4. Using company safes and bank vaults to store cash, with only authorized personnel having access, and using cash registers
5. Depositing all-cash intact daily
6. Making independent daily counts of register receipts and daily comparisons of total receipts with total deposits
7. Bonding personnel who handle cash.

Question 7

What do Debit Card, Credit Card and EFT Transactions do?

Answer 7

1. Debit and credit card transactions = increase internal control but have related bank charges.
2. Electronic funds transfer receipts = increase internal control over cash receipts.

Question 8

Cash Payment Internal Control

Answer 8

1. Authorizing only specified individuals such as the controller to sign cheques and authorize electronic funds transfer payments
2. Assigning the duties of approving items for payment, paying for the items, and recording the payment to different individuals
3. Using pre‐numbered cheques and accounting for all cheques, with each cheque supported by an approved invoice
4. Storing blank cheques and signing machines in a safe or vault, with access restricted to authorized personnel
5. Comparing each cheque with the approved invoice before issuing the cheque and making monthly reconciliations of bank and book balances
6. Stamping each approved invoice “Paid” after payment.