GENERAL FUND: FUNCTIONS, POLICIES AND MANAGEMENT - DUDAS - 2024

The general cash register is a subledger in which all cash receipt and payment transactions are stored, including bank deposits and withdrawals. It is the main store of information related to cash of a company.

Companies divide general cash into two segments: the cash disbursement journal, where all cash payments are recorded, such as operating expenses and accounts payable, and the cash receipts journal, where all cash receipts are recorded. such as cash sales and accounts receivable.

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A business uses the general box to keep track of the various cash receipts and payments that travel through a business.

The information in the general cash register is periodically recorded in the general ledger. It is routinely checked against bank records through a bank reconciliation, to ensure that the information in the book is correct.

If it is not correct, an adjustment entry is made to bring the general box into compliance with the bank information.

Functions of the general cash register

The economic activities of any business involve a regular inflow and outflow of cash and cash equivalents. The general fund helps the leadership of a company determine how much money the business has at any given time.

With this information, the business can show its cash flow statement to lenders and thus ensure that it is effectively meeting the competitive challenge.

Cash flow focuses on the money the company spends on investing, operating and financing activities.

In companies that handle a large number of cash debit and credit transactions, the general cash replaces a separate cash account on the company ledger.

Businesses with fewer cash payments and receipts may not require a general cashier and choose to use only one cash account.

Accounting record

The general box is used to record receipts and cash payments. It works as a auxiliary book.

Entries related to cash receipt and payment are first posted to the general cash register and then posted to the corresponding general ledger accounts.

Also, the general cash is a substitute for the cash account in the ledger. If a general box is properly maintained, there is no need to open a cash account in the ledger.

There are many reasons why a company may record transactions using a general box rather than a cash account.

- Daily cash balances are easy to access.

- Errors can be easily detected through verification.

- The entries are kept updated, because the balance is checked daily.

Policies

In the business context, safe cash policies are adopted, especially those related to checking the general cash, to encourage accurate reporting and prevent asset theft.

Keep money received separate from money for payments

Money received should never be put in petty cash. It will cause errors and confusion in the accounting records.

All money coming into the business must be promptly deposited into the bank and entered into the records before it is paid again. Otherwise, it can be confusing when reconciling the cash balance.

Give receipts for money received

Proper receipt issuance helps protect the business from someone pocketing the cash instead of depositing it. Receipts must be pre-numbered with duplicate.

Get receipts for money paid

Sometimes it may not be possible to obtain receipts. For example, when buying items in a market.

In this case, the cost of each transaction should be noted immediately so as not to forget the amounts. They can then be transferred to a cash receipt for a manager to authorize.

Deposit the cash in the bank

Having money in the office is tempting. Many times a fraud begins this way.

Cash must be deposited quickly in the bank. At most, in the three days following receipt.

Procedure to receive cash

To protect people who handle money, two people should always be present when opening cash boxes, envelopes, and other sources of money. Both people must count the cash and also sign the receipt.

Minimize cash transactions

The box should only be used to make payments when the other methods are impossible. Ideally, you should set up vendor accounts to pay invoices by check or wire transfers.

The advantage of paying by checks is that an additional set of records is produced in the form of a bank statement. In addition, it ensures that only authorized persons make payments, reducing the possibility of theft or fraud.

Driving

The general cash register is generally subdivided into a cash receipt journal and a cash disbursement journal when there are large numbers of transactions.

In a small business with less cash-related transaction volume, all cash transactions are recorded in a single general box.

Information process

Cash transactions go through different phases before ending up in a liquidity report. In general, money inflows and outflows are recorded by debiting and crediting the cash account.

For example, customer collections are accounted for by debiting the cash account and crediting the customer's accounts receivable account. The information in the general box is entered in chronological order, in order to facilitate the search for transactions.

The cash inflows are then entered into the trial balance, which helps accountants verify that total credits equals total debits.

The third step in the financial reporting process leads to disclosure of cash on the corporate balance sheet.

Transaction log

The first general cash entry is the beginning balance at the beginning of an accounting period. Each entry should contain a date, a note about the expense or receipt, and the total amount of the transaction.

General cash transactions must also be transferred to the corresponding accounts or titles within the general ledger.

For example, payments received in cash for services rendered are listed in the "Assets" section of the general ledger.

Out-of-pocket expenses for supplies and other business materials are listed as expenses.

A company must reconcile the general cash with the monthly bank statements received from the financial institution, and take into account discrepancies in funds.

References

1. Will Kenton (2019). Cash Book. Investopedia. Taken from: investopedia.com.
2. Accounting for Management (2018). What is a cash book? Taken from: accountingformanagement.org.
3. Ashley Adams-Mott (2019). What Is a Cashbook and a Ledger? Small Business - Chron.com. Taken from: smallbusiness.chron.com.
4. Steven Bragg (2018). Cash book. Accounting Tools. Taken from: accountingtools.com.
5. Marquis Codjia (2017). The Importance of a Cash Book in Accounting. Bizfluent. Taken from: bizfluent.com.
6. Humentum (2019). Top Tips for Controlling Cash. Taken from: humentum.org.