Internal control
Internal control: procedures such as segregation of duties, authorisation limits and reconciliations that keep accounting records accurate, prevent error and fraud, and safeguard a business's assets.
See it move
A company's cash book shows €12,400 while the bank statement shows €13,150. A customer payment of €900 is in the bank but not yet the cash book, and a supplier cheque for €150 is in the cash book but has not yet cleared. Adjusting each side gives €12,400 + €900 = €13,300 and €13,150 + €150 = €13,300 — both sides agree.
Check yourself
A company's cash book shows a closing balance of €9,650, while the bank statement for the same date shows €10,400. On investigation, the accountant finds a standing order of €340 paid directly from the bank account for insurance that has not yet been entered in the cash book, and cheques totalling €1,090 that the company has written and recorded in its cash book but that have not yet been presented to the bank. What is the adjusted (true) cash balance after both items are accounted for?