A better method is to use the stub only as a memo from which to make formal entry in the cash book columns—one for deposits on the debit side and one for checks on the credit side. These bank columns may be used, first, for the purpose of keeping the bank account, by showing the totals of deposits—but not the items composing each deposit—and the totals of the checks that have been drawn; and second, for the purpose of furnishing weekly or monthly totals for posting to a ledger account kept with the bank, thus making the ledger self-balancing without having to bring in the cash book balance.
If, however, the principle of double record (explained earlier in the chapter) is followed, there is no need of a special bank deposits column, since the total of the Net Cash column gives the amount of each day’s deposits, and similarly the Net Cash column on the credit side shows the checks drawn against the bank. Thus the policy of depositing in the bank all receipts and disbursing only by check has an added advantage in that it simplifies the keeping of the record of cash as well as proving it. Under this method, the cash journals may be summarized, just as the other journals, and posted to a Cash account in the ledger. Detailed instructions for the handling of the entries, balancing, and closing under this method are given in [Chapter XXXI].
Another and rather unusual method of keeping the cash book is to carry a Currency column on each side, supplemented by Bank columns for deposits and checks on the debit and credit sides respectively. In the debit Currency column are entered all receipts of money in regular course. When the bank deposit is made up, its amount is entered as a charge to the bank in the credit Currency column and also, as a memo, in the debit Bank column. As checks are drawn they are entered in the credit Bank column. Thus the balance of the Currency columns should show the actual amount of cash in the cash drawer at any time, and the difference between the Bank columns should show the balance in the bank. Though somewhat complicated, the method has its advantages under conditions where currency accumulates before being deposited in the bank.
Of course, under all methods of keeping the cash record, the requirement that all cash received be deposited and payment be made only by check should be strictly adhered to.
Entering Checks on the Cash Book.—When all disbursements are by check, every check drawn must be entered on the cash book and accounted for. Entry should be made in numerical sequence with suitable explanation of any spoiled checks. The amount of the spoiled check may be left blank or entered as usual, but in the latter case the spoiled check must also be included in the day’s deposits, and the bank’s cancellation stamp must be secured. Neither the deposit nor disbursement is posted, each entry being marked “contra” by way of explanation. This effects an inflation of the total receipts and disbursements, but inasmuch as the bank’s record also shows the inflation, an adequate safeguard is secured. The new check replacing the one spoiled is entered in regular order.
The method just discussed is perhaps the best way of recording the exchange of checks for cash. Sometimes a concern is asked to exchange its check for currency, the party making the request desiring to send the check through the mails or for some other purpose. The entry is best made on both the debit and the credit side of the cash book with reference “contra” in each case, but neither entry need be posted. This makes the cash book record check against the bank record and shows the full history of the transaction. When a check is cashed in currency, or when a check of larger amount is received in payment of a debt and the difference is returned in cash, no record need be made of the check, as only the nature—not the amount—of the deposit for the day is changed and no disbursement is made which affects the bank account. When, however, a check is issued for “change” in lieu of currency, record should be made, debit and credit, as shown above.
Branch Cash—The Working Fund.—Frequently cash working funds must be provided for the current expenses of branches or of a factory located at a distance from the main office. When the branch or factory keeps a separate set of books, it must be charged with the advances of the working fund and a careful audit of the way the fund is handled must be made periodically, just as would be done with an independent concern.
Such cash transfers may also be handled by the imprest method as explained above. The original advance is charged to “Factory” or “Branch Cash,” and is deposited in the branch’s local bank to the credit of the head office, the branch having the privilege of using it. The branch may draw checks against the fund, sending the canceled checks to the head office as supporting vouchers for its disbursements. These canceled checks become the basis for the replenishing checks and also for the charges for branch expenditures made on the head office books.
If the branch is a selling agency making sales for cash and on account, a modification of the system is necessary. Daily reports should be required from the branch. Its cash receipts should be deposited daily and a duplicate deposit ticket should be forwarded to the head office by the bank. The bank should be asked also to forward all canceled checks. All collections on customers’ accounts should be made from the head office. This does not prevent the abstraction of cash before deposit, but it at least places control or oversight of the bank cash account in the hands of the head office and secures a careful accounting of it.
Safeguarding Cash—General Principles.—Proper safeguards for the cash should always be provided. The method of the double record—the bank’s and the owner’s cash book—is good so far as it goes and acts as a check on cash transactions after the record is made, but does not insure that the cash book record will be made correctly in the first place. There are ways in which cash received may get into the cashier’s or salesmen’s pockets instead of the cash book. No system or method has yet been devised to prevent this entirely. Every system must rest at some point upon the integrity of the human agent, and will fail of its full efficiency and intended results if the agent fails in the trust reposed in him. Every effort should be made to prevent both petty thievery—the abstraction of small sums at every opportunity—and systematic robbery mapped out and planned with infinite care and detail. Only everlasting vigilance and a system of “checks” will secure satisfactory results, as occasionally it is the trusted employee who is not true to the trust placed in him.