Final answer:
Internal control procedures for cash disbursements include authorized signatures on checks, segregation of duties, documented authorization for expenditures, and the use of non-cash payment methods to establish audit trails. An overdraft occurs when there are insufficient funds in an account to cover the amount of a check.
Step-by-step explanation:
Internal control procedures for cash disbursements are critical for the proper management of an organization's finances. Key procedures include:
- Checks signed by authorized individuals to ensure that each disbursement is reviewed and approved.
- Segregation of duties where the employee responsible for cash receipts is not involved with cash disbursements.
- The employee who authorizes the payment should not be the one to write the check, maintaining a system of checks and balances.
- All disbursements are made by check, debit, or credit card to create a paper trail and avoid the risks associated with cash transactions.
- All expenditures are authorized which means that no payment should be made without proper authorization.
For transactions that involve payment for goods and services, one might need to use a check. To complete such a transaction, the store deposits the check in their bank account, and the bank processes it, transferring funds from the buyer's account to the seller's account. An overdraft occurs when an individual writes a check without having enough funds in their account to cover the amount, which can result in fees and financial problems.