"Managing Cash" from Boundless "Introduction to Accounting", originally published at https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/ under a CC BY-SA 4.0 license.

1. Boundless Lecture Slides
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2. • Cash Controls
• Using a Bank for Control
• Reconciling Cash Accounts and Bank Statements
• Basics of Cash Management
Managing Cash
Controlling and Reporting of Cash and Receivables > Managing Cash
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3. • Five elements of internal controls include the control environment, risk
assessment, control activities, information and communication, and monitoring.
• Businesses will generally be required to perform an audit at least once a year on
all of its financial reports and internal controls, including those controls associated
with cash.
• Three common types of internal controls for cash include bank reconciliations,
voucher systems, and electronic funds transfers (EFT).
Cash Controls
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Balance Sheet
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Controlling and Reporting of Cash and Receivables > Managing Cash

4. • Internal controls are meant to ensure that a business's assets are protected, that
its financial data is accurate, and to ensure efficiency.
• Most banks keep "signature cards" on hand for business accounts so its tellers
are aware of who can sign checks to withdraw funds.All other individuals are
prevented from withdrawing cash from the business's account.
• The bank generally sends the business a monthly statement summarizing the
activity related to cash.The statement will generally also include the
documentation related to each transaction.
Using a Bank for Control
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Deutsche Bank
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Controlling and Reporting of Cash and Receivables > Managing Cash

5. • Bank reconciliations are necessary because legitimate transactions that a
business has recorded in its books might not be listed on its bank statements and
vice versa.
• A bank reconciliation consists of a book balance column and a bank balance
column.One column is adjusted by adding all of the legitimate transactions that
either the bank statement or books do not show.The reconciliation is complete
when the two columns equal each other.
• When a legitimate transaction that was not recorded in the books is discovered, it
must be added by recording a journal entry.
Reconciling Cash Accounts and Bank Statements
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Cash
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Controlling and Reporting of Cash and Receivables > Managing Cash

6. • A voucher system is used for monitoring cash payments.
• A voucher system consists of vouchers, an unpaid voucher file, a paid voucher
file, a voucher register, and a check register.
• Before marking a voucher as paid, the person in charge of the system should
check the transaction's corresponding documentation, which generally includes a
purchase order, invoice, and receiving report.
• Deposits are generally monitored through bank reconciliations.
Basics of Cash Management
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A current liability, such as a credit purchase, can
be documented with an invoice.
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Controlling and Reporting of Cash and Receivables > Managing Cash

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Appendix

8. Key terms
• Bank Reconciliation A process that explains the difference between the bank balance shown in an organization's bank
statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records at a
particular point in time.
• bank statement a communication from a bank to a person holding an account in that bank, usually issued monthly, detailing the
value of the holdings in that account and the effects of all transactions occurring with respect to that account
• control A security mechanism, policy, or procedure that can counter system attack, reduce risks, and resolve vulnerabilities,
synonymous with safeguard and counter-measure.
• electronic funds transfer the transfer of money from one account to another, either within a single financial institution or across
multiple institutions, through computer-based systems
• internal control a process affected by an organization's structure, work and authority flows, people and management
information systems, designed to help the organization accomplish specific goals or objectives
• internal controls In accounting and auditing, internal control is defined as a process affected by an organization's structure,
work and authority flows, people and management information systems, designed to help the organization accomplish specific
goals or objectives [1].It is a means by which an organization's resources are directed, monitored, and measured.It plays an
important role in preventing and detecting fraud and protecting the organization's resources, both physical (e.g., machinery and
property) and intangible (e.g., reputation or intellectual property such as trademarks).
• journal entry A journal entry, in accounting, is a logging of transactions into accounting journal items.The journal entry can
consist of several items, each of which is either a debit or a credit.The total of the debits must equal the total of the credits or
the journal entry is said to be "unbalanced." Journal entries can record unique items or recurring items, such as depreciation or
bond amortization.
• purchase invoice the buyer's name for a commercial document issued by a seller to a buyer, indicating the products, quantities,
and agreed prices for products or services the seller has provided the buyer
• voucher A receipt.
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Controlling and Reporting of Cash and Receivables

9. Balance Sheet
Internal controls are vital to ensure that financial statements, such as balance sheets, are accurate.
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Controlling and Reporting of Cash and Receivables

10. Cash
Due to the amount of time between when a bank statement is prepared and when it is received by a business, the document may not accurately reveal
what the business actually has in terms of cash.This is why reconciling the bank statement is necessary.
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Controlling and Reporting of Cash and Receivables

11. Deutsche Bank
Keeping money in a financial institution, such as Deutsche Bank, can provide a critical control over a business's cash.
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Controlling and Reporting of Cash and Receivables

12. A current liability, such as a credit purchase, can be documented with an invoice.
Current liabilities are debt owed and payable no later than the current accounting period.
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Controlling and Reporting of Cash and Receivables

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Controlling and Reporting of Cash and Receivables
Which of these is not a common internal cash control?
A) petty cash log
B) bank reconcilation
C) voucher system
D) electronic funds transfer

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Controlling and Reporting of Cash and Receivables
Which of these is not a common internal cash control?
A) petty cash log
B) bank reconcilation
C) voucher system
D) electronic funds transfer

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Controlling and Reporting of Cash and Receivables
Determining whether the business keeps a large amount of cash
on hand that is easily accessible is what element of the internal
control?
A) control activities
B) information and communication
C) the control environment
D) risk assessment

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Controlling and Reporting of Cash and Receivables
Determining whether the business keeps a large amount of cash
on hand that is easily accessible is what element of the internal
control?
A) control activities
B) information and communication
C) the control environment
D) risk assessment