Which of the following is a common control over cash receipts?

• A. Segregation of duties between employees handling cash and those recording transactions
• B. Recording cash receipts only at the end of the month
• C. Allowing a single employee to both receive and deposit cash
• D. Delaying the deposit of cash receipts until the end of the week

Answer: (A)

Verified step by step guidance

1. Understand the concept of internal controls over cash receipts. Internal controls are procedures and policies designed to safeguard assets, ensure accurate financial reporting, and promote operational efficiency.
2. Recognize that segregation of duties is a key principle in internal controls. It involves dividing responsibilities among different employees to reduce the risk of errors or fraud. For example, the person handling cash should not be the same person recording transactions.
3. Evaluate the options provided in the problem. Segregation of duties is a common control because it minimizes the risk of theft or misappropriation of funds. Recording cash receipts only at the end of the month, allowing a single employee to handle both receiving and depositing cash, or delaying deposits until the end of the week are not effective controls and increase the risk of errors or fraud.
4. Consider the importance of timely recording and depositing of cash receipts. Delaying these processes can lead to discrepancies and increase the risk of theft or loss.
5. Conclude that the correct answer is segregation of duties between employees handling cash and those recording transactions, as it aligns with best practices for internal controls over cash receipts.