Internal Cash Control

Essay by axlianoCollege, UndergraduateA+, May 2009

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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...