Question

Which of the following is not a control that generally is established over cash receipts?

1) To prevent abstraction of cash, a control listing of cash receipts should be prepared by mailroom personnel.
2) To insure accurate posting, the accounts receivable clerk should post the customers' receipts from customers' checks.
3) To insure accuracy of the accounts receivable records, the records should be reconciled monthly to the accounts receivable controlling account.
4) To prevent theft of cash, receipts should be deposited daily.

Answer 1

The incorrect control over cash receipts is having the accounts receivable clerk post the customers' receipts because their role in the accounting process could allow for a conflict of interest and potential alteration of records.

Step-by-step explanation:

The control over cash receipts that is generally not established is: To insure accurate posting, the accounts receivable clerk should post the customers' receipts from customers' checks. This is because the accounts receivable clerk is involved in the accounting process and could potentially alter the records to conceal the theft; therefore, it is a conflict of interest for them to post receipts directly. Effective internal control systems separate duties to prevent fraud and errors, which means the task of posting payments should be done by an individual without access to incoming checks, which would typically be a clerk in the cash receipts department. In this context, reconciling records, preparing control listings, and making daily deposits are controls that help to manage money effectively, keep tabs on cash flow, and avoid overdraft fees that come with having insufficient funds.