Chapter eight

In chapter eight of ‘Fundamental Accounting Principles’, John Wild (2012) discusses the topic on cash and internal controls. Cash and internal controls are best explained by evaluating information of the transactions that a company engages in. information on bank reconciliations for example, help one to identify the cash balance that the company has and the cash balance that is recorded in the bank statement. A bank statement is efficient in that it shows when the depositor started and stopped transacting and the cash balance that was left and also all the changes that occurred during a specific period of time.

According to Wild (2012), cash and internal controls help to identify the amount of capital that has been used, expected income and also the balances that remain. This capital is in various forms such as cash or checks. The cash is any form of currency or deposit that is available in the company’s savings accounts or its deposits in the bank. There is also cash equivalents which comprise of short term investments or assets that the company can easily convert into cash. This may also comprise of assets whose sales will not be affected by any rate changes in the market since their maturity rates are close.

Checks on the other hand are a form of capital where the person depositing the check has signed on it, indicating to the bank that the amount indicated should be paid to the person named as the designated recipient. For there to be good cash and internal control management, a company ought to have an effective internal control system. This ensures that the right policies are implemented and adhered to when dealing with accounting and other forms of operations within the company (Wild, 2012).

 

 

Reference

Wild J, (2012) “Fundamental accounting principles” McGraw Hill