Cash control is a process used to verify the accuracy of all cash received and disbursed in any setting where goods and services are bought and sold. It involves documenting and recording all transactions immediately, limiting access to cash, and keeping task-related documents separate from physical cash.
Cash control is a process used to verify the complete nature and accurate recording of all cash received, as well as any cash disbursements that take place. As a general principle of responsible financial accounting, this process occurs in any setting where goods and services are bought and sold. As such, businesses, non-profit organizations, and households employ its basic principles.
To fully understand cash control, it helps to understand what is meant by cash when it comes to financial accounting. In addition to referring to currency and currency, this term is understood to also include forms of financial exchange such as money orders, credit card receipts, and checks. Essentially, any type of financial exchange that can be immediately traded for a fixed value qualifies.
Cash control means competently managing all these types of financial instruments by maintaining an accurate tracking system that takes into account both the receipt and disbursement of cash. Designing this process is generally not difficult, and there are some basic elements that will be incorporated into the process, regardless of whether the procedure is used at home or in an office or business environment.
First, all cash-related transactions must be documented and recorded immediately. The accrual method of accounting, in which gains and expenses are recorded when incurred, rather than when received or paid, is not used. Each cash receipt is recorded at the front desk, while each disbursement is entered at the time the payment is released. This mode of documentation requires only some basic templates that will record the necessary data. For the household, a checking account can be used to track all cash deposited in a common account for the good of the household, and the checkbook register can serve as the basic document that keeps track of incoming and outgoing transactions.
Then, sound procedures require that there be multiple, but limited, people who have access to the cash, which serves two purposes. First, people may be responsible for the way cash is managed. Second, having at least two people overseeing the process helps ensure that important transactions can take place at any time, even if one individual is unavailable for some reason.
Cash control also requires that task-related documents be kept separate from the physical location of the cash. In other words, the ledger used to record cash transactions should not be kept in the safe with currency, money orders, and checks. This simple precaution helps ensure that the task of tampering with physical evidence related to cash in cash is made more difficult and therefore minimizes the chances of theft occurring.
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