Cash

Question 1

Why may a cheque be dishonoured

Answer 1

-Cheque has expired

-Person issuing the cheque has insufficient funds in their bank account

-Cheque is post-dated

Question 2

Purpose of internal controls

Answer 2

-Safeguard the assets of the business

-Ensure business transactions are recorded accurately

-Ensure that the business complies with laws and regulations

Question 3

Why is there a need for internal controls over cash

Answer 3

-Cash is highly portable and hence has a high chance of getting stolen

-A business implements internal controls to reduce the possibility of theft and reduce the likelihood of error

Question 4

Types of internal controls: Segregation of duties

Answer 4

Separate cash handling and cash recording duties among different employees so that no single person has control over the entire cash process

Question 5

Typers of internal controls: Custody of cash

Answer 5

Secure cash and cheques in a locked storage and limit access of cash to authorised personnel

Question 6

Types of internal controls: Authorisation

Answer 6

Obtain proper approvals for all payments from authorised personnel

Question 7

Types of internal controls: Bank reconciliation

Answer 7

Compare the business’ records with the bank’s records to identify items that caused the differences between the ending balances in the business cash at bank account and the bank statement