In your responses to classmates, identify what type of internal controls would ensure proper classification of cash equivalents. How would that fit into the company's overall system of internal controls over cash? Use examples to illustrate your position, and be sure to cite GAAP to support your claims.

Classmate answer:

Cash Equivalents and Internal Controls

Cash and Cash Equivalents are highly liquid current assets shown on the assets side of the balance sheet. Where cash and Cash equivalents are short term market securities. As GAAP, discloses restricted movement Cash Equivalency disclosed reconciliation helps identify restricted cash flow either on the balance sheets or notes to accounts.

Internal Controls are procedures designed by specifically to support cash receipts and disbursements listed as follows:

1. Disbursement vouchers and sequential(proper) receipts should be maintained plus each transaction in these vouchers.
2. All cash payments must have proper authorized as well as prior authorized person by higher hierarchy.
3. All cash payment should be supported by inequitable documentation.

Individuals are tempted to divert cash for personal use because of it being liquidated. Bank Reconciliation- requirements basic but most powerful for any organization. We can know the total number of banks, dormant accounts (no movements) balance. Physical Control- companies always keep funds contingency and emergency activity. This should be reviewed periodically and under proper authorized persons. Ensured needs safeguard of cash incase of accounts payable to supplier they need introduced in control systems. This helps make sure there is not any false payment methods.