Final answer:
It is false that disbursements can be made by check or cash as part of good internal control. Ideally, disbursements should be made through check or electronic transfer for better traceability and fraud prevention. Cash disbursements are less traceable and pose a higher risk which makes them not preferable for strong internal controls.
Step-by-step explanation:
The statement that disbursements can be made either by check or cash as part of good internal control is false. In the context of internal controls, transactions should generally be traceable, which requires the use of documented and verifiable methods such as checks or electronic funds transfer. While cash disbursements are not entirely prohibited, they are less preferred due to the difficulty in tracing and the increased risk of fraud and theft.
From a control perspective, using a demand deposit, otherwise known as a checkable deposit, provides a paper trail and facilitates better cash management. When you balance your checkbook, you keep tabs on your cash flow and avoid overdraft fees. Using a check or electronic funds also aligns with the principles of transparency and accountability as outlined by laws that require regular statements and accounts of receipts and expenditures, such as those cited in public finance regulation.
Depository institutions, like banks, make it far easier for both individuals and businesses to perform transactions without the need to carry large amounts of cash. These institutions provide mechanisms such as direct withdrawal, writing checks, and using debit cards, which are underpinned by internal controls that enhance the security and efficiency of financial transactions within the economy.