Q9RQ - Horngren'S Financial And Managerial Accounting

Question

How do businesses control cash receipts by mail?

Step-by-Step Solution

Answer

The businesses use four steps to control the cash receipts.

Step 1: Definition of cash receipts control

Cash receipts control is the control that includes the control of the cash receipts.

Step 2: Cash receipts controlled by mail

In the cash receipt control by mail, a business follows the following steps:

Step 1: In the first step, all the checks are opened by the mailroom employees. These employees send checks to the treasurer.

Step 2: In the second step, the control treasurer sends the checks into the bank for collection.

Step 3: In the third step of the control, the accounting department uses the remittance department to record the journal entry of cash accounts.

Step 4: In the final step of the control, the controller compares the following records of the day:

• Bank deposit amount from the treasurer

• Debit to Cash from the accounting department