We explain what a cash audit is with practical cases.
Learn the reasons why cash audits are carried out and the frequency with which they should be carried out.
Cash auditing is the process by which it is verified that the money in the cash register is what should be there. To do this, the sum of bills and coins in the tokelau email list physical cash register of the company must match the accounting balance of the cash account, which reflects cash receipts and payments.
When a cash audit is carried out, three different situations can occur:
Square cash register. The money in the physical cash register of the company matches the balance of the cash accounting account.
There is a lack of money. The result of the cash reconciliation is less than the accounting balance of the cash account.
There is excess money. The result of the cash reconciliation is greater than the accounting balance of the cash account.
The accounting of a company must reflect the true image of the company. Therefore, all its accounting accounts must reflect the economic and financial reality of the company. These accounting accounts include the cash and foreign currency accounts. The accounting balance reflected in these accounts must match the sum of the cash amounts found in the physical cash register of the company.
In addition, they are also carried out to detect possible thefts or errors.
They can be carried out systematically. For example, at the end of the day, or in an unscheduled manner, to ensure that the cash register is balanced at all times and to check that it is carried out according to the defined procedures.
In a cash reconciliation, shortages or surpluses may appear, with respect to the balance reflected in the accounting ledger of the cash account. These differences can be recorded in a cash difference accounting account. Shortages will be recorded as expenses and surpluses as income.
Cash audits can be used to determine whether the people responsible for the company's cash register are acting honestly, efficiently and responsibly.
When should cash audits be performed?
The frequency with which cash audits should be performed will depend on the type of company and other circumstances. For example, when the person responsible for the cash register changes shifts, a cash audit must be performed, since the person who joins the company has to make sure that the cash register is square and balanced. If the cash audit is not performed when the shift changes, then it will not be known which of the two cashiers has the cash register out of balance.
Depending on the amount of cash that accumulates in the cash register, one or more audits can be performed per day. If a lot of cash is collected in the company, it is advisable to perform a cash audit every so often to make sure that it is square and to put some of the cash aside in a safer place.
In companies with moderate cash collection volumes, if it is carried out daily, it will be easier to locate the reason for any discrepancy.
A cash count is also carried out in account audits. In this case, the count is carried out at the end of the financial year and is usually recorded in a cash count document signed by the person responsible for the company's cash register.
Examples of cash counts
Cash counts can be carried out in a fully automated manner using automatic collection devices linked to point-of-sale terminals. In these cases, it would be normal for the data reflected in the cash account to coincide with the count of coins and bills.
On the other hand, the more traditional cash count consists of carrying out a cash count and recording the cash (bills and coins) that exists in the cash register at the end of the period. To carry out this task, a spreadsheet can be used, detailing the types of coins and bills, so that entering the number of each type automatically gives us the amount of cash in the till.
Therefore, by means of cash counting, it is verified that the sum of cash in the till matches the sum reflected in the company's point of sale terminal or in the accounting program. If there are differences, the collection and payment documents justifying the entries that have been transferred to the cash book must be compared.
In conclusion, cash counting is revealed as an essential practice to ensure the integrity and accuracy of a company's cash. By understanding its different situations, from a balanced till to shortages or surpluses, and examining the reasons that can cause imbalances, business owners can maintain more rigorous financial control.
