Cash Receipts

WHY?

Cash receipts involve the collection, recording, and deposit of cash received by an organization. This process is critical as it directly impacts the organization’s liquidity and financial reporting accuracy. Implementing internal controls in the cash receipts process is essential to prevent theft, fraud, and errors, ensuring that all received funds are accurately recorded and promptly deposited into the bank. Effective internal controls enhance accountability, transparency, and the overall financial integrity of the organization.

HOW?

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1. Segregation of Duties

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[1-1] Ensure different individuals are responsible for receiving cash, recording transactions, and reconciling accounts.

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2. Authorization Controls

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[2-1] Verify that all cash receipts are authorized by a designated person.

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3. Documentation and Records

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[3-1] Use pre-numbered receipts for all cash transactions.
[3-2] Maintain a detailed record of all cash received, including the date, amount, and source.

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4. Physical Controls

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[4-1] Store cash in a secure location (e.g., a locked cash drawer or safe).
[4-2] Limit access to cash storage areas to authorized personnel only.

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5. Cash Reconciliation

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[5-1] Reconcile cash receipts with bank deposits regularly.
[5-2] Compare the cash register to the cash on hand regularly.

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6. Bank Deposits

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[6-1] Deposit cash receipts regularly.

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7. Independent Reviews

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[7-1] Periodically have an independent person review the cash handling and reconciliation process.
[7-2] Perform surprise cash counts.

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Q&A

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Q1: How can we ensure collection controls for cash receipts?

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Q2: What are the best practices for custody controls in cash handling?

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Q3: How should reconciliation controls be handled for cash receipts?

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Q4: What are the key points in managing the general ledger for cash transactions?

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Q5: What controls should be in place for incoming mail that contains cash or checks?

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Q6: How should petty cash funds be managed?

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