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Chapter 4 – Cash, Cash Controls

Question 1. How much of the businesses revenue is collected as cash and what are the controls in place to protect this asset?

The business revenue collected as cash would depend on the sales from the distribution of goods and services. To protect the business’ cash assets, it is important that the business immediately audited and deposited in the bank to avoid or prevent losses and stealing.

Question 2. How is cash generated to support this business?

Cash will be generated by the business from the sales of goods and services to customers or end users. Other forms of cash such as cash equivalents also support the business. Cash equivalents are in the form of instruments that mature and gain interest within a certain period of time. Receivables are also considered cash equal to revenue.

Question 3. What is the percentage of Cash transactions, Credit Card transactions, and Accounts Receivables transactions? How are receivables managed for this business?

Ideally, the percentage of cash transactions, credit card transactions, and accounts receivables transactions must be that they are greater than debts or liabilities. The largest percentage of cash should be sourced from the business’ transactions, followed by credit card transactions and accounts receivables.

Receivables are managed for the business through constant monitoring. Ledgers are recorded to keep track of receivables and due date. It is regularly checked to make sure that receivables are asked from customers within the target period. The business also maintains a credit worthy list, which contains people who meet their obligations in paying for receivables.

Question 4. How are the duties of receiving cash and cash disbursements

Duties of receiving cash and cash disbursements are segregated such that receipts are handled by the bookkeeper and the cash disbursements are processed by the accountant. The bookkeeper is responsible for keeping track of transactions by receiving and noting invoice. The auditor and accountant work together to determine and process disbursements when needed.

Question 5. What type of checks and balances do you have in place when cash has to be counted, recorded and deposited into the bank?

The types of checks and balances in place when cash has to be counted, recorded, and deposited must involve splitting up financial roles and responsibilities. There must be different teams that will count and record cash. Another team will double check the cash. Different people will then be tasked to deposit the money in the bank. The bookkeeper and accountant would also have to reconcile the cash with the records.

Question 6. Who established your Accounts Payable Contracts and what type of terms are negotiated? How is this relationship maintained and improved?

For the business, the Accounts Payable Contracts must be an accountant and the business owner. Types of terms negotiated include those that involve payment, authorization of payments and transactions with vendors, and the signing of the contract.

Question 7. Do you have a list of credit worthy customers?

The business should create a list of credit worthy customers so it would know which customers to give credit in future transactions.