Question

In: Accounting

The owner of details dog wash and spa just hired an office manager to handle all...

The owner of details dog wash and spa just hired an office manager to handle all the office functions for him. Among other responsibilities, the office manager will handle cute accounting functions such as processing customer payments, writing checks to employees to pay the payroll, handle daily bank deposit at the bank, pay suppliers, and reconcile the company bank account bank reconciliations.

What internal cache control practice is being overbooked by the owner?

a) Separation of cash payment from cash disbursement function

b) Making daily cash deposits

c) frequent preparation of bank reconciliations

d) Ensuring all cash disbursements are tracked by making payments by check

Solutions

Expert Solution

Ans - Separation of cash payments from cash disbursement function (Option 'a')

A major reason why cash misappropriations takes place in a company is because of poor handling of cash dealings. One of the most important internal cash control practice is Segregating duties related to cash transactions. Cash dealings such as duties related to Cash disbursements, cash payments, cash deposits in bank etc should be performed by separate individuals as one person's task is getting checked by another and there is less scope of stealing. But if a single person handles all cash related duties than it becomes very easy to alter books and misapprapriate cash.

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