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Internal Controls for Cash Disbursements - Accounting - YouTube
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Now let's talk about internal controls
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for cash disbursements cash going out,
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there's a couple there's a few things
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that we need to keep up with here. First
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we want to
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have any anti-theft safeguards we want
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to make sure that we're not getting
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stolen from as the cash goes out
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so first we want to require all
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expenditures to be made by check again
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in order to get checks cached you have
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to endorse them we have the paper trail
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so it does give us a layer of security
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there. Another one is we want to deny
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access to the accounting records to
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anyone other than the owner who has the
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authority to sign checks,
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again that's just protecting what we
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have so no other people don't know
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exactly what we have
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and they don't know exactly what they
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can get into so again it's just these
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are all
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layers the more you put in there the
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more layers it makes it harder for
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somebody to steal from you.
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Another thing that we can use is what's
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called a voucher system
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and this is this is predominantly used
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for when especially with travel
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and this is a set of procedures and
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approvals
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designed to control cash disbursements
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and the acceptance of
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obligations, so a lot of times when you
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have to go to a business trip sometimes
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your business will say
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you know what we'll give you a lump sum
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of money now and you
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use it when you go to vegas for whatever
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and then you just bring back whatever
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you have left and you don't have
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anything left because they gave it to
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your friend
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but a voucher system is a little
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different a voucher system is more of
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the perc
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the approvals of so with a voucher
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system what happens is if you've got to
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go to a business
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conference in vegas, you say hey you go
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to your boss and say hey I need to go to
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this conference and they approve it and
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they approve what it's going to cost you
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in terms of airfare,
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uh hotel, conference fees, and all that
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kind of stuff
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and once you get that approved then you
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go to your conference in vegas and you
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spend
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your money up front and then you bring
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back all the receipts
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and then they pay you back they
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reimburse you with that,
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so it's it's a little bit more secure in
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the sense of they're just not giving you
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a you know
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a lump sum of money to begin with you're
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using your own money
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up front and then you're going to get
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reimbursed for so that's a very good way
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to
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control the cash disbursements as much
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as possible.
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The last thing we're going to talk about
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is something that some of you may be
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very
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familiar with which is the petty cash
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system or the petty cash fund.
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This is a fund that you used to make
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small expenditures that cannot wait for
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the formal check writing process
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if you've ever worked the place with
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petty cash drawer you know it's usually
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a little lock box with some
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insignificant amount of cash there so if
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you need to go get stamps
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or cash register, receipt paper or
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anything like that you're just going to
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pull it from there rather than having to
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wait for the check
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the formal check writing process to
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occur before you get those kind of
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things
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but it is still dealing with cash so we
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need to be able to journalize that so
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let's look at what it would look like if
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we're going to record
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anything that's dealing with the petty
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cash fund.
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So let's start by just establishing a
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petty cash fund so it says on january
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1st golf company established a 400
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petty cash fund, so pretty much what
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we're doing is we're taking it out of
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our normal cash account
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and we're going to put it into a petty
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cash account so in order to do that
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we're going to say you know on january
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1st so 1-1 we're going to say petty cash
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because that account is going up it's an
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asset
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because it's just like cash it's just
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you're marked for something petty cash
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of
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400 and then we're going to decrease
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our normal cash
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account for 400.
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Now that's the establishment of it, now
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let's talk about how we would record it
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if as things happen so let's look at the
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continuation of this example
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it says during the month the petty
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cashier paid out 185.23
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for special visitors dinners, 34 dollars
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for the
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visitors cab ride back to the airport,
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72.47
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for some of the office printer paper and
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pins, and 29 dollars
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to ship a package. The petty cashier
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asked for and received a receipt
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for each of the disbursements made that
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is huge because we want to make sure
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that we have the documentation
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of all these all these things occurring,
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prior to requesting
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for the fund to be replenished the petty
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cash you counted the remaining cash
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in the petty cash drawer and found to
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have 76.43
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left. Okay. So a lot of things going on
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here there's a lot of different
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numbers and things that we're going to
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have to do but I want you to understand
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the petty cash drawers slightly
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different than any other system that we
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use
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because it's what's called an impress
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account an impress account means we do
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nothing
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for it or you know regarding it until
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it's time to replenish
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and then when it's time to replenish
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that's when we're going to record it in
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our journal entries, so if you notice
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we're not going to do one of these and
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then another one of these and another
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one of these in
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individual journal entries we're just
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going to wait until that line that says
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prior to requesting the fund to be
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replenished
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that's letting us know that it's time to
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actually go to work, we're going to
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actually do one large
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lump sum uh journal purchase our journal
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entry for for this
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account, so let's just go through this uh
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from the top. We're going to say that
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we are the 185.23 for a special
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visitor's dinner
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that's an expense so we're going to go
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ahead and expense it so we'll say you
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know whatever the date is
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we're going to go ahead and expense
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it we're going to call it meals expense
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and for that 185.3 okay, then we're going
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to move to the next one the 34
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for cab ride okay we're going to call
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that cab fare expense
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for 34. All right. 72.47 that's for the
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printer paper
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that's supplies okay and then finally
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the 29.87
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to ship a package that's a shipment
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expense shipping expense or delivery
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expense 20
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29.83 everything's good there okay so
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those are the four things that we got
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the receipts for,
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now we need to take it out of our petty
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cash
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now I'm gonna or so 400
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is what we started with and it says that
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the last one that we had 76.43
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left that means that we used 323.57 of
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our petty cash fund.
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Now if we add up the four things that we
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put into our debit
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well there you go so there's our petty
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cash that's how much it went out okay
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if we add up the four things the meals
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expense, the cap fair expense, the
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supplies, and the shipping expense if we
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add those four things up
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that's actually going to give me 30 oh I
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went too far
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yeah well let me go back yeah here we go,
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woohoo
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let's just do this real quick that one
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there yep there we go. Okay.
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So we add up everything that we have
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here that's going to give me 321.57
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now notice my debit and my credit is not
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equal so how do I
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force it to be equal I use the cash
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shorten over,
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so I'm off by two dollars so I'll say
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cash short over two dollars
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now my debits and my credits are equal
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and so I can move forward now I can
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replenish it so now let's replenish it.
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I have to replenish 323.57 so the way I
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do that
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I would say petty cash 323.57 and cash
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I'm getting it from cash for 323.57,
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that's it how you do it in a
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conceptually
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but that's not how you do it practically
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because all this happens at one time so
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really what I would do is
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since I have a petty cash credit of
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323.57
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and I have a petty cash debit of 323.57
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I can actually collapse that down and
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just make it cash
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of 323.57, by the end of this the petty
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cash is still
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400 it's just I've taken it out of cash
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and that's how you deal with petty cash
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funds. Thank you.
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