The cash count is the analysis of transactions cash, at a certain time, in order to check whether it has posted all cash received and if the balance throws this account corresponds to what is physically in cash money cash, checks or vouchers. It also serves to know if internal controls are being carried out properly.
The auditors or executives assigned to do so usually carry out cash counts on dates not foreseen by the cashier. It is common for the cash receipts to appear missing or surplus, with respect to the general ledger control account. These differences are generally posted to an account called cash differences. The shortfalls are charged as losses and the surpluses are credited as income. If these differences are not corrected, at the end of the year, the cash difference account must be canceled against the profit and loss account.
A brief bibliographic review to broaden and deepen the concept:
Soldevilla and Sobrevías (p.289) explain that treasury accounts are subject to a special risk given the continuous inflows and outflows of money, it may happen that there is an error or a misappropriation of cash for which they deserve a special control. In relation to the cash register, it is convenient that there is a special control over its movements and that the so-called cash settlement be carried out periodically. This consists of the physical count of money in existence and comparing this count with the cash balance according to accounting. Cash vouchers are often included in the tonnage. Since cash vouchers are not money, but proof of expenses or loans, they must be accounted for as what they are and not as cash. In the event that there are differences when making the settlement, it will be necessary to adjust the accounting balance so that the cash account reflects the real value of the money in the cash.
Godoy and Greco (p.139) define it as the technical-accounting procedure that aims to weigh the effectiveness of internal control over fund movement operations. It allows to determine if the people in charge of the administration of the box act with honesty, efficiency and responsibility.
For them, the cash count is a material inventory of the existing funds at a given moment.. Consiste en el cotejo de los resultados obtenidos con los saldos contables si éstos se llevan estrictamente al día, es decir, si las operaciones realizadas se vuelcan sin dilación en los libros de contabilidad, el cotejo en sí no pasa de ser una sencilla confrontación de importes; sin embargo, si de este cotejo aparecen diferencias, entonces, y especialmente si las discrepancias son importantes, la tarea de determinar las razones que dieron lugar a las mismas suele ser compleja y requiere pleno dominio de la técnica contable y de los principios de organización de empresas. Sí los libros de contabilidad no se encuentran al día, la labor de determinar la concordancia de los resultados del arqueo con los saldos que arrojan aquéllos, entraña un procedimiento de ajuste que hace aún más necesaria la pericia en contabilidad.
Hortigüela (p.70) indicates that in order to understand the cash settlement, it is first necessary to define what the cash count means, since the two operations tend to be called the same:
- Cash counting: consists of counting and recording the cash (bills and coins) that exists in the cash at the end of the period, obtaining the total amount, and verifying the collection and payment documents supporting the cash book entries. Cash Tonnage: This is the check that the cash count totals match the ending balances in the cash book.
The balance of the collection and payment documents that have been noted in the book should also be checked for matching. If during the cash count any difference is detected, which may be due to errors in the collection or payment in cash, errors in the preparation of receipts or annotations in the book, loss, or forgetting to prepare a receipt of collection, it must be amended the error. If the cause of the lag cannot be ascertained, the deviation detected must be noted in the cash register book.
The document in which the cash count is recorded and the settlement is verified is called the cash settlement record. It details, separately, all the cash and the collection and payment documents that were in the box at the time of the count. Once the minutes have been completed, it is essential to compare the balance of the cash book with the result of the count to verify that they coincide and, if not, detect the error produced and proceed to its solution.
Piedra (pp. 62, 63) states that the cash count consists of verifying that the money in the coffers of the economic unit coincides with the balance of the representative cash accounts. The reason for this check is that, when carrying out the various collections and payments, errors may have been originated that lead to the accounting balance differing from the final money supply. These differences that arise when making the cash settlement are called settlement differences. In the event that such differences exist, their causes should be analyzed, among which the following could be cited:
- Errors in the accounting record Missing or lack of supporting documents Errors in collections or payments.
Once the origin of the aforementioned differences has been analyzed. the accounting balance must be adjusted to the amount shown by the tonnage. To do this, generally, the company can choose the following alternatives:
- Designate a cashier who is responsible for the differences in settlement. In this case, the responsible cashier is usually paid a stipulated amount of money that is called a currency bankruptcy. normally included in his salary, in order to respond at all times to the differences in tonnage that arise. In this way, the differences arising will be covered by the cashier himself and, therefore, the final inventory according to the settlement will always coincide with the accounting balance of the representative cash accounts, not generating any accounting entry. Assume the settlement differences as your own. If the company opts for this alternative, the tonnage differences must be reassigned in the accounting by charging or crediting the cash accounts with credit or debit, respectively,to a differential account, the balance of which will finally be charged to income for the year.
Through the following video lesson, from the Lic. In Commerce and Accounting Elsa Marina Rangel Hernández, you will learn more about how to make a cash count, one of the adjustment elements that allows the proper accounting of items, a magnificent complement study.
Bibliography
- Godoy, Amanda Alicia and Greco, Orlando. Accounting and Commercial Dictionary. Valletta Ediciones, 2006Hortigüela Valdeande, Ángeles, Analysis and management of collection and payment instruments, Editorial Paraninfo, 2012Piedra Herrera, Francisca. Financial Accounting I, Delta Publications, 2009 Soldevila, Pilar y Oliveras Sobrevías, Ester. General accounting with the new PGC, Profit Editorial, 2010
