What are Cash and bank balances?
Cash and bank balances refer to the amount of money that a person or company has on hand in the form of physical cash, as well as the amount of money that is held in checking, savings, and other types of bank accounts. The term “cash and bank balances” is typically used on a company’s balance sheet to represent the amount of liquidity that the company has available to meet its financial obligations. This figure is important for both internal management purposes and for external stakeholders, such as investors, who want to know how much money the company has available to fund operations and pay dividends.
Procedures/Controls
- Segregation of duties relating to authorization of transactions, handling of cash/ issuance of cheques and writing of books of account, and rotation of the duties periodically;
- Proper authorization of cash and banking transactions;
- Daily recording of cash transactions;
- Safeguards such as, restrictive crossing of cheques, use of pre-printed, pre-numbered forms;
- Periodic reconciliation of bank balances;
- Reconciliation of cash-on-hand with book balance on a daily basis or at other appropriate intervals, including surprise checks by higher authorities,
- Safe custody of cash, cheque books, receipt books, etc; and security documents;
- Cash/ fidelity insurance
Audit of Cash and Bank Balances
To audit cash, the auditor would review the company’s cash records to ensure that they are accurate and complete. This would involve verifying that all cash receipts and disbursements have been recorded, that the amounts are accurate, and that the company has sufficient supporting documentation for the cash transactions. The auditor may also test a sample of the cash transactions to ensure that they have been properly classified and recorded in the company’s financial statements. Additionally, the auditor would review the company’s policies and procedures related to cash to ensure that they are in compliance with generally accepted accounting principles (GAAP) and the company’s internal policies.