Control of Cash Disbursements

Topics: Petty cash, Cash, Imprest system Pages: 2 (503 words) Published: September 4, 2013
Control of Cash Disbursements
Control of cash disbursements is important for companies as most large thefts occur from payment of fictitious invoices. One key to controlling cash disbursements is to require all expenditures to be made by check. The only exception is small payments made from petty cash. Another key is to deny access to the accounting records to anyone other than the owner who has the authority to sign checks. A small business owner often signs checks and knows from personal contact that the items being paid for are actually received. This arrangement is impossible in large businesses. Instead, internal control procedures must be substituted for personal contact. Such procedures are designed to assure the check signer that the obligations recorded are properly incurred and should be paid.

Voucher System of Control
A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations. A reliable voucher system follows standard procedures for every transaction. This applies even when multiple purchases are made from the same supplier. A voucher system’s control for cash disbursements begins when a company incurs an obligation that will result in payment of cash. A key factor in this system is that only approved departments and individuals are authorized to incur such obligations. The system often limits the type of obligations that a department or individual can incur. In a large retail store, for instance, only a purchasing department should be authorized to incur obligations for merchandise inventory. Another key factor is that procedures for purchasing, receiving, and paying for merchandise are divided among several departments (or individuals). These departments include the one requesting the purchase, the purchasing department, the receiving department, and the accounting department. To coordinate and control responsibilities of these departments, a company uses several different...
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