ACG 4381 Accounting Controllership and Internal Control

Importance of Proper cash management

The importance of having sufficient cash to cover the short-term operations, purchasing of assets and repayment of liability is appropriately reflected by the term Cash is King. The cash is the liquid asset of the company and it can be converted into anything in the short period. The proper management of cash helps the business to achieve the objective of maximizing profit with minimum liquidity (McNeil et al., 2015). The proper cash management is vital to the business for the following reasons:

• The proper management of cash helps to ensure that the business have sufficient cash during the peak period of purchase and other purposes.
• The proper management of cash helps to ensure that the business are able to pay the current obligations as they fall due.
• In developing plan for capital expenditure projects, the cash management plays a very important role.
• The proper management of cash help the business to arrange funds from outside at affordable cost and with favorable terms and conditions.
• The proper management of cash helps the business to take advantage of the special purchases, discount and the opportunities for business.
• The cash management helps to ensure that the surplus funds are appropriately invested so that they are not idle and the business can make sufficient earnings.

Therefore based on the above discussion it can be said that the statement proper cash management is vital to the business is true.

Cash Fraud

The cash is a liquid asset and if it is stolen, it is essentially untraceable. The cash fraud can be conducted in a number of ways like:

• fraud at cash register;
• farad in mail box;
• fraud conducted by the cashier;
• fraud conducted in the deposit pouch;
• fraud conducted by the removal of petty cash;
• fraud conducted by removing the pay envelope;

However, out of the all the ways in which the fraud can be conducted the most common is the petty cash the fraud perpetrated by cashier. In this case the fraud can be conducted either by removing cash from the cash box when it is unguarded or manipulate petty cash register and falsify expenses for conducting fraud (Gohareh et al., 2017).

Internal Control

The internal control is the method or procedure that the business adopts for

• safeguarding of assets;
• to ensure that the business complies with all the operational and financial requirements;
• ensure that there is accuracy and reliability in the financial information provided;
• ensure that the business objective is achieved;

The internal control for the cash can be classified for the cash receipts and the cash payment. The internal control for the cash receipt is discussed below:

• The cash should be deposited to bank on a daily basis.
• It should be ensured that the cash receipt is posted on a daily basis.
• The cash sales should be controlled by the cash register.
• The cash register should be regularly updated and balanced.

The internal control procedure for cash payment is discussed below:

• All the cash disbursement should be authorized.
• The disbursement of cash should be immediately recorded in the register.
• The cash payment should be made against appropriate vouchers.

Reference

Gohareh, M. M., Gharneh, N. S., & Yaghin, R. G. (2017). Techniques for cash management in scheduling manufacturing operations. Journal of Industrial Engineering International, 13(2), 265-273.

McNeil, A. J., Frey, R., & Embrechts, P. (2015). Quantitative risk management: Concepts, techniques and tools. Princeton university press.