Internal Controls for Cash - Financial Accounting

The video tutorial discusses effective internal controls for cash management, emphasizing three key guidelines: separating cash handling from record keeping, promptly depositing cash receipts in the bank, and using checks or EFT for cash disbursements to maintain a paper trail. These practices help prevent theft and ensure accurate financial records.

Why is it important to separate cash handling from record-keeping?

• To prevent fraud and errors

• To comply with tax regulations

• To increase efficiency in cash management

• To reduce the workload of employees

What is a key reason for depositing cash receipts promptly in the bank?

• To simplify accounting processes

• To reduce the risk of theft

• To avoid bank fees

• To earn interest on the cash

How often do some businesses deposit cash to ensure security?

• Every other day

• Once a week

• Twice a day

• Once a month

Why are checks or EFTs preferred for cash disbursements?

• They are faster than cash transactions

• They provide a verifiable paper trail

• They are more convenient for the payer

• They are less expensive than cash

What is a potential issue with using cash for disbursements?

• It can be easily lost

• It is difficult to track and verify

• It incurs additional fees

• It is not accepted by all vendors