Justine Escalante 4a10

Practices for your Accounting Control

Every accounting system should have a series of checks and balances. These are put in place to detect errors and fraud quickly but more importantly it keeps control of the books in the hands of the controller. This is a basic security checklist that every controller should review and implement with their accounting department.

Billing and Invoicing

Identify each point where invoicing occurs. Are logs or journals maintained at each point of invoicing? All invoices and credit memos are pre-numbered. If issued by computer the detail is verified to the accounts receivable detail. People performing receivable functions do not approve credit memos, bad debt write-offs or requests for checks. Math is checked on every invoice. Each invoice is checked for proper sur-charges including freight.

Bank Accounts

Identify each bank account. Verify who is authorized to sign checks. Blank checks are pre-numbered and locked up. Only proper people have access to supplies of blank checks. Check signers are not assigned duties such as handling cash,processing A/R, A/P, or payroll. Checks are not issues to cash or bearer.

Cash Disbursements

Purchase Orders should specify date, vendor, description, price, quantity, extended amount, and payment terms. Receiving reports should specify date received, quantity received, verify description and verify vendor. Any check request to be approved in writing on check request form. A purchase order and receiving document is attached to each invoice and verified (all documents agree and math is checked). A block stamp or distribution ticket is completed with date entered, initial check number, and amount

Cash Collection

Mail

A safe is used to store cash. Only proper people have access. Combination is restricted. Person receiving cash & checks does not originate entries to accounting records or reconcile bank accounts. Money is counted at end of day from cash register and deposit is prepared and placed into safe. Cash receipts are recorded daily. Immediately upon receipt checks are endorsed for deposit only bank, account number. Checks are deposited daily. Bank statements are delivered to address and person unrelated to handling cash and are reviewed (alternative direct access to bank statement via computer). Bank reconciliations are prepared by someone independent to check signing and cash handling. Any irregularity is taken directly to the controller. Controller approves month end cash balance after reconciliation.

Mail is opened and reviewed by someone other than the bookkeeper and company correspondence is reviewed before being distributed. Important and urgent information is brought to the attention of the Controller and General Manager.

Inventory Control

An inventory control program has been established to ensure that there's a transfer of value from receiving, to inventory and then sales. Inventory is counted on a schedule so that it is adjusted continually for shrinkage and overages. Adjustments or abnormal inventories are reviewed and approved by the controller. A physical inventory is taken on an annual basis using written instructions for obtaining a clean cut-off for receiving and sales, a procedure for obtaining accurate counts including a process for verifying accuracy using test counts for a 5% sample of line items. Inventory is physically secure whenever the business is closed or unsupervised.

Petty Cash

Restrictions exist on the nature and amount of items that can be paid from petty cash. Vouchers are prepared in writing and written in ink. Cashing checks for employees is prohibited. IOU's are prohibited. Periodic surprise audits are conducted.

Accounts Receivable

The A/R Subsidiary Ledger is reconciled monthly to the General Ledger. Quantities and amounts invoiced are verified by testing a reasonable sample. An aging of receivables is maintained and a collection program exists for accounts more than 10 days past due. Debit and Credit memos are approved by the controller. Accounts to be turned over for collection and bad debt write-offs are approved by the Controller. Claims for adjustments, freight claims, insurance claims, and miscellaneous are recorded as receivables so that they get the discipline of regular follow-up. Credit limits should be established for each customer and before credit is extended, approval is required. Credit should not be extended for all types of transactions.

Accounts Payable

Payroll

The A/P Subsidiary Ledger is reconciled monthly to the General Ledger. Quantities and amounts invoiced are verified by testing a reasonable sample. Freight and shipping bills are recorded and checked to invoices to verify they are charged to customers. Vendor statements are checked to A/P balances. Receiving practices verify counts and descriptions based on purchase orders and packing slip information. Invoices are matched with purchase orders and receiving Documents. Extensions are checked, Discrepancies are reviewed with the controller to determine the appropriate action. Documents are stamped posted and when paid are stamped paid with the date paid and check number. Travel and expense reports are approved by General Manager. Accruals are developed and periodically reviewed for items such a property taxes, insurance, and other items paid annually. Purchase orders are required for services such as repairs, advertising, printing, and other outside services.

Hours worked are documented with a time clock. Rules prohibit employees from clocking in for other employees and from starting prior to the authorized start time, and from working overtime unless authorized. Employees are placed on the payroll only after all the proper documentation has been completed application, I-9, payroll deductions, etc. and an authorization form indicating approved compensation plan. All outstanding obligations are settled before a final paycheck is issued. An employee manual is given to new employees and is signed for before submitting payroll to the payroll service it should be approved by the General Manager.