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Internal Check

The document outlines internal check procedures for cash receipts and payments to prevent fraud, including having separate employees handle different stages of transactions, issuing pre-numbered receipts, reconciling bank statements, keeping unused receipt books locked, and using checks requiring multiple signatures for large payments. Procedures for cash receipts include depositing funds daily, advising debtors to request receipts, and canceling spoiled receipts with initials.

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Aasir NaQvi
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147 views

Internal Check

The document outlines internal check procedures for cash receipts and payments to prevent fraud, including having separate employees handle different stages of transactions, issuing pre-numbered receipts, reconciling bank statements, keeping unused receipt books locked, and using checks requiring multiple signatures for large payments. Procedures for cash receipts include depositing funds daily, advising debtors to request receipts, and canceling spoiled receipts with initials.

Uploaded by

Aasir NaQvi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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INTERNAL CHECK WITH REGARD

TO CASH RECEIPTS AND CASH


PAYMENTS

ANAND SARAN
142005
Internal check is an accounting procedure
whereby routine entries for transactions are
handled by more than one employee in such a
manner that the work of one employee is
automatically checked against the work of
another for detection of errors and irregularities.
It is a division of duties that does not permit one
individual to carry out all stages of transactions.
An internal check is intended to prevent frauds.
In the business there is a greater risk of cash
misappropriation. So there is a need for safety measures.
Following system may be adopted to control over cash receipts.

1. Cashier: There should be a separate clerk known as cashier to


deal with the receipts of cash. As soon as cash is received, it
should be entered in a rough cash book or diary. The cashier
should not be authorised to keep cash with him, to make
expenditure out of it and to make entries in the ledger and
other books of prime entry.
2. Presence Of Responsible Officer :
All remittances should be opened by the cashier
in the presence of a responsible officer who is not
connected with the office of the cashier, and
should be crossed immediately by means of a
rubber stamp as ‘ Not negotiable – A/c Payee
only.’
3. Bank Reconciliation: All receipt should be
banked daily. It is also necessary that from time
to time, bank reconciliation statements should
be prepared to reconcile bank and cash
balances.

4. Counter Foil: Receipt of money should be


in duplicate or its counter foil must be prepared
and kept for reference unused receipt books
must be kept safe custody under lock and key.
5. Issuance of Receipt: A printed serially
numbered receipt should be issued for the amount
received. They should not be prepared by someone
who is connected with entering remittances in the
rough cash book or diary.

6. Daily Deposit: All the receipts of cash and


cheque must be deposited on the same day or next
morning. There should be a separate person to take
money to the bank and he should not be connected
with the cash transactions.
7. Debtors: The debtors or institutions from whom
cash is received should be advised to collect proper
receipts from the head office. They should also be
directed to send payments through crossed cheques.

8. Spoiled Receipts: Spoiled receipts should be


cancelled and must not be detached from the
counterfoils or totally removed from the receipt book.
If some alteration is made in the receipt already
written, it should be properly initialled.

9. Cash Sale: There should be a sound system of cash


sale. Recording method of cash sales should be well
organized under proper control and supervision.
10. Collection of Cash By Agents: Three copies of
cash receipts should be prepared by the agent. One
should be given to the pay. Second should be sent to
office and third should be kept by the agent. Agent
should also be paid by the cheque.

11. Confirmation Statement: Statement of accounts


should be sent at regular intervals to the debtors for
the confirmation of balance. It will also reduce the
chances of frauds.
1.Separate Cashier: A good system of internal check
is one in which a separate person has charge of
making payments. He should have no connection with
the receipt of cash.

2.Use Of Cheque : Cheques should be used for all the


payments except the petty cash. It is the first measure
for internal control in case of payments.

3.Use Of Crossed Cheque : Before dispatching the


cheques these should be crossed. So any person
cannot draw the amount.
4.Safety Of Cheque Books : Blank cheque books
should be under the safe custody of the responsible
official so that these may not be misused for payment
by any fraud.

5.Checking Invoices: Proper regulations should be in


force for checking invoices and other relevant
correspondence before cheques are prepared. Such
vouchers should be stamped ‘paid’ before the cheques
are signed.
6.Authorised Signatories: All cheques and bills
should be scrutinised and signed by the proper
authority.

7.Entry In Cash Book : Payment should be recorded


in the cash book as the payment is made.

8.Authorized Signature :- Those persons should sign


on the quiches who are authorized to sign.
9.Payments of Special Nature: A strict regulations
should be in force to sanction payments of a special
nature. Such a work should be entrusted to directors
or high officers. It is also a good practice if cheques
involving heavy amounts are signed by more than one
responsible person.

10.Confirmation of Accounts: Confirmation of


accounts with the creditors should be made through
direct correspondence.
11. Bank Reconciliation Statements: Bank
Reconciliation Statements should be prepared to
reconcile bank and cash balances from time to time.

12. Petty Cash Payments : Petty cash payments


should be kept under proper control.

13. Wages : A proper system should be in operation


for the payment of wages.

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