Internal Cash Control Essay

1156 words - 5 pages

Internal cash control is very important to any business. Without effective methods in place to ensure that funds and resources are being used in an ethical and efficient way, a company may lose money or run into many other problems. Through proper establishment of responsibly, segregation of duties, document procedures, and security measures, any company should be able to maintain their funds and feel confident that their employees are producing accurate and ethical results (Kieso, Kimmel, & Weygandt, 2003).In the exercise dealing the cash disbursement within Idaho Company one could find some major weaknesses. The first of these weaknesses with their internal control over cash disbursements would be the checks they use to make payments. These checks are not pre-numbered and they are kept in an unlocked file cabinet. To ensure internal control over disbursement of cash a company must have pre-numbered checks for record keeping purposes and must always keep their checks in a secure area where only specific people would have access. Idaho Company needs to establish responsibility when it comes to paying bills and having access to funds. In addition the purchasing agent is the person that receives the goods and pay to the vendors. In this scenario there are two people who have divided responsibility of paying bills. This action it is open for many misunderstanding.Only one person should have the responsibility of paying the bills and the person in charge of paying the bills should never be responsible for reconciling the payments. Also, the person responsible of purchasing should not be the person responsible of receiving the goods. In addition it should be only one person responsible of reconciling the company's account. In order to inform Idaho Company of the breakdown in internal cash control within the company, the following memo was created:MEMOMarch 22, 2009To: Management of Idaho CompanyCc. Purchasing agent and Treasurer of Idaho CompanyFrom: Alfred Del Valle, Financial Advisor ADVSubject: Recommendation for improving company procedures.You have done a good job keeping the financials of Idaho Company balanced. But, there are better ways to keep track of the company's financial that would help avoid any misunderstanding. I would like to share some suggestions with you provided by a financial consult company in New York. Some changes need to be made with the handling of funds within the company.First, all checks are to be pre-numbered and may only be written by company treasurer. This will help to keep a better control of the checks made by Idaho Company. Second, the purchasing agent will take care or all purchasing only and send the purchase order (PO) to a receiving department. Third, the receiving department will receive all the goods and compare the PO with the vendor's invoice. Once he or she has matched the order with the invoice, please sign for approval and transfer the invoice to the treasurer for payment. The final recommendation...

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