Content Standard 12.1

Cash Control

Kawalan Tunai

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Explanation

Cash control refers to the set of internal procedures and measures a business puts in place to safeguard cash, ensure the accuracy of cash records, and prevent misappropriation. Within Chapter 3, Accounting for Internal Control, cash control is a central focus because cash is the most liquid current asset, the easiest to transfer, and the most exposed to theft, misuse and fraud compared with other assets. For this reason, every business must establish an orderly system of controls covering the full cycle of cash, from the point of receipt to the point of payment.

The first Learning Standard requires students to understand the purpose (tujuan) of cash control. Its main purposes include protecting cash from theft, loss and misappropriation; ensuring that all cash receipts are recorded completely and accurately; ensuring that all payments are properly authorised and supported by source documents; detecting errors or theft quickly; and ensuring the business always holds a sufficient cash balance to finance daily operations. Good cash control also allows management to make financial decisions based on reliable cash information.

The second Learning Standard emphasises the methods (kaedah) of cash control. Common methods include separation of duties (the person who receives cash is not the person who records or keeps it), banking all cash collections intact every day, making all large payments by cheque or bank transfer, operating a petty cash system (the imprest system) for small expenses, using serially numbered receipts and vouchers, obtaining authorisation before any payment is made, keeping cash in a safe or cash register, and preparing a bank reconciliation statement periodically to compare the cash book records with the bank statement.

Separation of duties is the core method of internal control. When the functions of receiving cash, recording transactions, and keeping cash are divided among different individuals, one employee cannot commit fraud and conceal it alone. Fraud would then need collusion between several people, which reduces the opportunity for it and increases accountability. Likewise, by banking all collections intact each day, the amount of cash held on the premises is reduced, which lowers the risk of theft and makes it easy to cross-check the receipts issued against the bank paying-in slips.

The petty cash system, based on the imprest system, is another important method. Under it, a fixed amount (the float) is allotted to the petty cashier for small expenses such as stamps, stationery and fares. At the end of the period, the amount spent is reimbursed so that the float is restored to its original amount. This system controls minor spending without repeatedly issuing cheques, while keeping tidy records through the petty cash book. The bank reconciliation statement completes the control by confirming that the cash book balance agrees with the bank statement balance after adjusting for items such as unpresented cheques and deposits in transit.

Worked examples

Setting up a petty cash float (imprest system)

Sinar Maju Retail sets a petty cash float of RM300 on 1 May. A cheque is drawn from the bank account to transfer the money to the petty cashier.

Double entry: Debit Tunai Runcit RM300; Credit Bank RM300.

During May, petty cash is used for stamps RM45, stationery RM80 and fares RM55, totalling RM180. At month end, the float is reimbursed by RM180 so the balance returns to RM300. Reimbursement entry: Debit Tunai Runcit RM180; Credit Bank RM180.

Paying for purchases by cheque (not cash)

As a control method, all large payments are made by cheque. Mega Jaya Furniture buys goods for resale worth RM1,200 and pays by cheque.

Double entry: Debit Purchases RM1,200; Credit Bank RM1,200.

Paying by cheque rather than cash leaves a bank record that can be cross-checked, and payment is only made after authorisation and with a supplier invoice as support.

Banking cash collections intact every day

Cantik Selalu Salon collects cash sales of RM2,500 on 10 June and banks all of it on the same day (banking intact).

Double entry: Debit Bank RM2,500; Credit Jualan RM2,500.

The paying-in slip of RM2,500 is then cross-checked against the serially numbered receipts issued. If the totals do not match, any misappropriation can be detected immediately.

Practice

State three purposes of cash control in a business.

Answer: Three purposes of cash control are: (1) to protect cash from theft, loss and misappropriation; (2) to ensure all cash receipts and payments are recorded completely and accurately and supported by source documents; and (3) to detect errors or fraud quickly while ensuring the business holds a sufficient cash balance for daily operations.

Explain three methods of cash control that a business can practise.

Answer: Three methods are: (1) Separation of duties: the person receiving cash is different from the person recording and keeping it so that one individual cannot commit and conceal fraud alone; (2) Banking all collections intact every day so that cash held on the premises is reduced and easily cross-checked against receipts; and (3) Making all large payments by cheque or bank transfer so that a bank record exists and payment is only made after authorisation.

A business receives cash sales of RM1,800 and banks it intact on the same day. Show the double entry.

Answer: The double entry is Debit Bank RM1,800; Credit Jualan RM1,800. By banking the collection on the same day, cash held on the premises is reduced and the paying-in slip can be cross-checked against serially numbered receipts to confirm there is no misappropriation.

How does the imprest system for petty cash help control cash? Explain with one numerical example.

Answer: Under the imprest system, a fixed float is allotted, for example RM250. During the period, small expenses are paid from this float, for example RM160. At the end of the period, only RM160 is reimbursed so the balance returns to RM250. The system controls cash because the maximum amount on hand is always limited to the float, every expense is supported by a voucher, and the petty cash book provides a tidy record for checking. Reimbursement entry: Debit Tunai Runcit RM160; Credit Bank RM160.

Exam tips

Key terms

Kawalan tunai (cash control): Internal procedures and measures to safeguard cash, ensure the accuracy of cash records and prevent misappropriation.
Pengasingan tugas (separation of duties): Dividing the functions of receiving, recording and keeping cash among different people so one person cannot commit and conceal fraud alone.
Sistem panjar (imprest system): A petty cash system with a fixed float; the amount spent is reimbursed so the balance returns to the original float.
Penyata penyesuaian bank (bank reconciliation statement): A statement comparing the cash book balance with the bank statement balance after adjusting for items such as unpresented cheques and deposits in transit.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 5

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