Cash and its Importance and Control

Cash is one of the important finance terms and it is also part of money. If money is in the form of currency, then that money becomes cash. Cash in business is the asset but if cash is in reserve form for completing future obligation, then it will be liability of business. After, deducting reserve amount, we can use balance cash for our business purposes.

Our old elders were used to save money in money box. So, cash’s also other meaning is money box. These days, cash has become more important because, all financial results are analyzed on the basis of cash flow statement. If we receipt cash between two accounting period, it is inflow of cash and if we have paid between two accounting period, and it is outflow of cash.

Importance of Cash

If we understand what is cash, then we can also understand analyze the cash position of business. Is it sound or weak? What amount will be needed for paying different payments? Good knowledge of cash will provide you the  power to make good planning of cash for future needs.

Control of Cash

As cash is a liquid asset so, it is easy to transfer or exchange. Large number of accounting and financial scandals are relating to misappropriating funds, money and cash. So, it is the prime duty of account manager to manage cash daily basis from point of sale and should send it to bank. Effective internal audit of cash is also useful for effective control of cash. If the organization has independent department for checking cash physically, then it is minimum chance to commit fraud in cash. To accept and pay the payment via electronic form is good way to reduce cash dealing. With this, no need to keep large amount in business office.

Learn Cash Handling Control from Video

This video highlights common cash control weaknesses and how to fix them.