Cash accounting
From ArticleWorld
Cash can be called as any legal medium of exchange that is directly negotiable and free of limits. It is made up of notes, coins, cheques savings deposits, bank deposits and postal orders. A significant requirement is that it must be at once available as legal tender; thus postage stamps, loans to employees, and fixed period deposits can't be referred to as as 'cash' for accounting balance sheet purposes due to the fact that they need to be converted before they are available as cash.
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Cash accounting control system
Given that cash is the most liquid asset, it's the most easily improperly used. Hence, each business enterprise ought to have an effective internal accounting control system for cash. In smaller businesses, the owner or manager most often exercises personal control over all cash exchanges. In large commercial enterprises, however, it is nearly impossible for one person to exercise individual control; hence, the accounting system of the commercial enterprise has to be created to encompass the necessary control measures over cash exchange. The design of this accounting system needs to include control totals at different points through which the accuracy of a series of exchanges can be looked at.
Cash and employees
A functioning cash accounting control system needs to meet the following demands: employee's functions and duties should be kept separate to make sure that those workers who receive, handle, or pay out cash in the very least are not working the recording function. This prevents a person from misappropriating funds and concealing the fact by counterfeiting entries in the accounting books. The roles of the employees have to be divided in such a way that, a misappropriation by one worker will be discovered by another worker. This means that the partnership of a least two workers is needed if funds are going to be embezzled.
Cash receipts
Cash receipts ought to be recorded in such a way that the actual cash received can be measured against an independent daily listing. Thus, a source document should be prepared instantly after cash is received. The source document must show the amount, the reason for the receipt, the date of receipt and, where applicable, the person who made the payment. Examples of this type of accounting source document are cash sales, cash sales slips, receipts invoices and audit and control rolls used in cash registers.
Cash banking
All cash received needs to be banked daily and no payments should be made from the receipts. This makes sure that cash is safe overnight and bank deposit slips can be used as a control total for cash received.
Cash and cheques
All payments except petty cash payments are required to be made by cheque. Cheques are required to be countersigned and supported by an accurately controlled and authorized source document that is used as as proof of payment. The jobs of the employees in charge of handling cheques have to be kept separate from those of the workers recording the transactions.