Internal Control

 

– Policies and procedures implemented by a business to safeguard assets and ensure the business is working towards its stated objectives.

Internal Control measures implemented are specialized and adjusted for each business and its requirements. Internal control is more effective after a thorough analysis and evaluation of the strengths and weaknesses of the business’s existing internal control measures. 

Control over stock:

-       Regular stock takes

-       Keep source documents of transactions involving stock 

Control over cash:

-       Depositing the cash from the cash register daily - checking transactions against their source documents for accuracy 

-       Having the correct dates on cheques, two signatures are required when issuing cheques 

-       Folio numbers for source documents to match transactions to their source documents

-       Bank reconciliation which corrects errors made in the cash receipts and cash payments journal 

Control over debtors :

-       Perform a credit check to confirm creditworthiness before allowing a debtor to purchase goods on credit 

-       Set credit terms - penalise debtors who do not pay on time by charging interest

-       Debtors reconciliation 

Control over creditors: 

When deciding on a supplier determine whether they can supply goods frequently, whether they provide a discount for prompt payments and also if the credit terms stipulated by the creditors must be longer than the credit terms for the business’s debtors. 

When goods have been received from the creditor, always ensure that they are not damaged and that the order corresponds with invoice number. 

References

  • Anon., 2007. The Answer series: Grade 11 Accounting. 2007 ed. Cape Town: The Answer.

  • Anon., 2019. Investopedia. [Online]. Available at: https://www.investopedia.com/ [Accessed 3 October 2019].

  • Doctor, K., 2015. FLIPHTML5. [Online]. Available at: http://fliphtml5.com/fkul/mgtf/basic [Accessed 1 October 2019].

  • T Hall, D. W. P. S. A. A. P. G. P. F., 2017. Accounting Study Guide. 2016 ed. Musgrave: New Generation Publishers .

Neha Pillay (2019)

Grade 10Keroshan PillayComment