Internal Control and Cash Management Notes

Establishment of Responsibility: Only designated personnel should be authorized to handle cash receipts.
Segregation of Duties: Separate individuals are responsible for receiving cash, recording cash receipts, and maintaining custody of cash.
Documentation Procedures: Use remittance advices, cash register tapes, and deposit slips to create a paper trail.
Physical Controls: Store cash in safes and bank vaults, use cash registers, limit access to storage areas, and deposit cash daily.
Independent Internal Verification: Perform daily cash counts and compare total receipts with bank deposits.
Human Resource Controls: Conduct background checks, require mandatory vacations, and implement bonding for employees handling cash.

Debit Card Transactions: These are cash transactions where the retailer receives funds directly into their bank account, net of a fee charged per transaction.
Bank Credit Card Transactions: These are cash transactions where the retailer receives funds directly into their bank account, net of a fee charged as a percentage. These fees are generally higher than debit card fees.
Mail-in Receipts: Cheques should be endorsed "For Deposit Only" immediately; remittance slips must be sent to the accounting department independently of the physical cash.
Electronic Funds Transfer (EFT): Includes peer-to-peer payment systems, direct deposit of government payments, and card transactions; standard internal control principles apply to these methods.

Establishment of Responsibility: Only designated personnel are authorized to sign cheques or approve electronic payments.
Segregation of Duties: The individuals who approve and make payments must be different from those who record disbursements; cheque signers should not record the transactions.
Documentation Procedures: Use pre-numbered cheques in sequence and ensure every cheque is supported by an approved invoice.
Physical Controls: Secure blank cheques, restrict access to payment systems, and utilize electronic payments whenever possible.
Independent Internal Verification: Compare cheques against approved invoices and perform a monthly bank reconciliation.
Human Resource Controls: Require bonding and mandatory vacations for employees in payment roles.

Authors: Weygandt • Kimmel • Mitchell • Warren • Novak
Source: Accounting Principles Tenth Canadian Edition, Chapter 7: Internal Control and Cash.
Licensing: Reproduction or translation beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful.