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Accounting

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Axia College Material
Appendix B

Cash Management Matrix

Directions: Using the matrix, list how each of the principles of internal control works, and give an example for each. Next, list how each of the principles of cash management works, and give an example for each.

|Principles of Internal Control |How it Works |Example |
|Establishment of responsibility |Designating one person to a task. |If one person is in charge of a bank deposit, they are held |
| | |responsible for putting the correct amount in the bank, the |
| | |addition of the money, and if it is wrong (short/long), there is|
| | |no question of who is responsible for the mistake. |
|Segregation of duties |Divide the duties among employees and be consistent that they |Checking in merchandise, this person would know that they are |
| |know the responsibility of this duty and only that person |held responsible to know what is coming in the door and that |
| |performs this duty. |they are being charged correctly. |
|Documentation procedures |Signatures and pre-numbering for the transactions of merchandise|By providing invoice numbers, the accounting department has less|
| |coming in and out. |of a chance to double up on transactions and ensure that they |
| | |are not paying or being paid more than once for the merchandise,|
| | |By signing, this ensures that someone has checked in the |
| | |merchandise, ensuring it has for sure been received. |
|Physical, mechanical, and electronic controls |Security, logging of time (for payroll), systems to avoid theft |Time clock, safe, register key, log on codes/passwords, alarm |
| |(loss). |systems, locks, keys and anti-theft devices. |
|Independent internal verification |Auditing and verifying |Comparing inventory, cash receipts, invoices, and reports. |
|Other controls |Making employees take vacations, |To ensure that employee theft is not occurring. Bonding insures|
| |Bonding employees |that the employee is taking responsibility for their actions. |

|Principles of Cash Management |How it Works |Example |
|Invest idle cash |Investing cash is more profitable than hanging on to it. |Depositing any cash in the bank is a better investment than just|
| | |hanging on to it, it is worth more in the long run and also |
| | |shows what kind of money is being made for the company. |
|Plan the timing of major expenditures |Make large expenditures when a large cash flow is coming in. |Maybe a season brings in more money than another, that would be |
| | |a good time to make large expenditures. |
|Delay payment of liabilities |Pay bills on time, but not too early. |By hanging on to cash as long as possible and paying bills on |
| | |time improves credit and allows you to have a higher amount of |
| | |money and looks like the company is making good money. |
|Keep inventory levels low |Maintaining inventory, ensuring that there is not too much back |Ensuring that too much back stock isn’t taking up space that is |
| |stock or too little. |needed or even expiring. |
|Increase the speed of collection on receivables |Being owed money isn’t making money, can’t count on it till it |Offering special pricing for paying early will provide cash in |
| |is in hand. |hand, do not count on money until it is hand. |

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