Internal Check.—By internal check is meant the method by which employees check each other’s records, control not resting entirely in any one clerk. Thus a system of record-making which combines the work of the cashier and bookkeeper under one clerk or which gives the cashier access to the ledgers is one which invites dishonesty.
Where the cashier has entire control of the cash, and besides opens the incoming mail, makes up his daily deposits, has his pass-books balanced periodically, and files the canceled checks, he has every opportunity to abstract cash and falsify his records. But where he must make detailed daily reports of the cash to the manager, treasurer, or some other officer; where he is denied access to the records—except his own cash record—and where his record is subject to periodic proof; where the mail is opened first and receipts listed by an independent clerk; where a careful system of proving receipts from cash sales and of allowing no unauthorized deliveries over the counter is employed; where every member of the office force is required to take a vacation during which his work and records are cared for by other employees—there is a very satisfactory system of internal safeguards and checks.
All these devices and systems are applicable in full only in large concerns where minute division of duties is possible. In smaller concerns where many duties have to be combined under one person, the problem of safeguarding the cash and providing other measures to prevent fraud of various sorts is more difficult. In such a concern, at least the cash received through the mail should be listed first by someone other than the cashier or bookkeeper, and the daily deposit slip should be compared with this list to see that all the cash items are included. The cash received from cash sales should also be proved daily against the sales tickets.
Statement of Receipts and Disbursements.—A periodic report of cash is usually made by means of a statement of receipts and disbursements. This statement is an abstract or summary of the cash book, showing the total receipts from various sources and the causes of the disbursements and their totals. A simple form is given below:
Form 40. Weekly Statement of Receipts
and Disbursements
To assist in checking past deposits, an itemized record of daily cash receipts is often kept, analyzed as to gold, silver, currency, notes and checks. To be of value this record should be filed with the daily deposit tickets and should be later available for purposes of comparison.
CHAPTER XLII
NOTES RECEIVABLE AND PAYABLE
Conditions Precedent to the Present Use of Notes and Bills.—During the twelfth and thirteenth centuries there was much bad money in circulation in Europe because of the widespread practice of coin-shaving and the entire lack of standards of purity of the coins. If a monarch needed funds for war or government purposes, his easiest way of getting them was to increase the amount of base alloy in the coins of the country or to increase the rate of seigniorage. As the former method might be resorted to several times during the reign of one sovereign, the weight and relative purity of metallic coins had no relation to the denominated value of the coins, and they fell under general suspicion. Consequently, only the money dealers, who could determine the actual value of coins by assaying them, were willing to trade for coins. These men gradually became the custodians of moneys for merchants, who were given receipts showing the assay value of the coins deposited. Because the receipt represented tested and proven value, it was a more acceptable medium of exchange than the coins themselves.
Medieval trade was subject to many perils, chief of which was that from robbers. Any safeguards placed about the transportation of money from one place to another, or any method devised for settling debts without the transportation of coin and bullion, were more than welcome. Out of these conditions arose the method of settling debts by means of drafts. The draft, not countenanced by law at first, had standing, however, under the “law merchant,” the code of rules recognized by merchants as governing commercial relations. This code was later incorporated by statute into the law of the country.