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CASH DEFINED
Cash includes
CHAPTER 10 Money
Cash management Duplicates of credit card and EFTPOS sales
and control Negotiable instruments
cheque
PowerPoint Presentation by
Matthew Tilling postal note
2012 John Wiley & Sons that a financial institution will accept
Australia Ltd

CONTROL OF CASH CONTROL OF CASH RECEIPTS

Cash is the asset most subject to theft Cash received through the mail
Need a good internal control system for Control relies heavily on separation of record
handling cash and recording cash keeping and custodianship
transactions
3 important principles Cash receipts from cash sales
1. Separation of responsibility for handling and Use of cash register
custodianship of cash from maintaining records Pre-numbered sales dockets
for cash
2. Banking intact each days cash receipts Cash short and over
3. Making all payments by electronic transfer or by Cash shortage is recorded when daily sales are
cheque recorded
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INTERNAL CONTROL
CONTROL OF CASH PAYMENTS
AND CASH RECIEPTS
Internal Control Concepts Cash Receipts Application
Approving invoices for payment
Clear lines of Responsibility Only designated people act as cashiers Employees who approve should not also prepare
Separation of record keeping People who handle cash do not bank cheques
and custodianship cash or record receipts in accounts Check that items were properly ordered and
Division of responsibility for Mail clerk records receipts through the actually received
related transactions post while another person supervises
Signing cheques and approving electronic
Mechanical and electronic Use of cash registers and EFTPOS
devices equipment transfers
One staff member records cash receipts Employees who prepare cheques should not also
Internal Control
another compares receipts with deposits approve
Physical Control
Use of safe on premises for cash storage Payment should be clearly indicated
and night safe for deposits 5 6

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INTERNAL CONTROL BANK ACCOUNTS AND

AND CASH RECIEPTS RECONCILIATION
Internal Control Concepts Cash Payments Application
Cheque accounts
Clear lines of Responsibility Designated people authorise payments Essential element of internal control
Separation of record keeping People who sign payment instruments Source documents
and custodianship are not involved in recording payment
Use of Electronic Funds Transfer
Division of responsibility for Person who authorises payments does
related transactions not sign the cheques Reduces processing costs
Mechanical and electronic Use cheque printing machines to The Bank Statement
devices prevent changing of amounts
Record of transactions from the bank
Perform regular bank reconciliations and
Internal Control
monitor petty cash fund

Physical Control Use safe to store unused blank cheques

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BANK RECONCILIATION Reconciliation Procedure

Cash at Bank account balance rarely agrees To prepare a bank reconciliation you require:
with balance as per bank statement Last bank reconciliation
Differences include Cash receipts and cash payments journals
Items in journals not on bank statement Cash at bank ledger accounting
Unpresented or outstanding cheques
Outstanding or late deposits
Bank statement for the period since last
reconciliation
Items originated on bank statements
Service and bank charges, interest, EFT transactions etc.
Errors either by bank or entity

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Reconciliation Procedure Reconciliation Procedure

Step 1: Check all items and errors from last
reconciliation have cleared
Any items still not cleared include in current
reconciliation
Step2: Compare
Cash receipts journal with credits in bank statement
Cash payments journal with debits in bank statement
Marking entries that appear in both and identifying
differences
Step 3: Update cash journals for items
captured by bank statement.
Step 4: Deal with errors
Adjust cash journals for any errors in them
Notify bank of any errors in statement
Note these errors on reconciliation until corrected.
Step 5: Total cash journals and post to ledgers
Step 6: Prepare bank reconciliation

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EXAMPLE OF
THE PETTY CASH FUND
A BANK RECONCILIATION
R.ROBSON AND SON To avoid the expense and inconvenience of
Bank Reconciliation Statement
As at 31 July 2013 writing many cheques to cover minor
Balance as per bank statement 399.10 Cr expenses many entities have a petty cash
Add: Outstanding Deposit 219.40
618.50
fund
Less: Unpresented cheques Establishing the fund
1922 $10.00
General Journal
1923 77.40
Jan 2 Petty Cash 100
1924 22.05
Cash at Bank 100
1925 82.56 192.01
(Petty cash fund established)
Balance as per Cash at Bank account 426.49 Dr

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THE PETTY CASH FUND CASH BUDGETING

Making payments from the fund Need for cash budgeting
Use a petty cash voucher or receipt Projection of anticipated future receipts and
Reimbursing the fund payments
Non-cash items excluded
General Journal
Will ensure:
Jan 31 Stationery Expense 15.22
Office Supplies Expense 12.30 Entity can meet commitments and maintain credit
Postage Expense 56.47 standing
GST Outlays 8.40 Assessment of expenditure
Cash at Bank 92.39 Borrowings (and interest expense) minimised
(Petty cash fund reimbursed)
Surplus funds utilised
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CITY ENTERPRISES - Cash Budget

For two months ending 31 December 2013

Cash at bank, beginning of month

November
$ 800
December
$ 6 614
CASH MANAGEMENT
Expected cash collections from sales:
Cash 36 300 38 500 Principles of cash management
Credit 34 320 36 080 Revenue collection time for accounts receivable
Total from sales 70 620 74 580
Total cash available 71 420 81 194
Postpone payments to accounts payable
Estimated cash payments: Keep inventory levels to a minimum
Purchases 36 652 38 808 Invest surplus cash
Wages 16 000 16 000
Plan for capital expenditures
Rent 4 620 4 620
Advertising 3 300 4 400 Analysing adequacy of cash flows
Purchase of printer 990 Short-term cash flow adequacy ratio
GST payable 2 344 2 258
Cash flow adequacy ratio
T. Duncan, drawings 900 900
Total expected payments $64 806 $66 986
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Cash at Bank, end of month $ 6 614 $14 208

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