- 10 Marks
Question
(c) You have been asked by your client, a garage proprietor, to advise on a system of control for cash sales. Set out the points you would take into consideration before giving your recommendations. (10 marks)
Answer
- Types of Cash Sales:
- Consider the types of cash sales the garage handles, such as sales of petrol, vehicle parts, repairs, motor vehicle sales, vehicle hire, or forecourt shop sales. Each type may require different control measures.
- Segregation of Duties:
- Ensure segregation of duties is in place where possible, such that the person handling cash is not responsible for recording sales or reconciling cash. This reduces the risk of fraud or errors.
- Documentation and Records:
- The garage should maintain adequate documentation for all cash sales, such as invoices, receipts, and till tapes. This documentation should be reviewed regularly to ensure completeness and accuracy of records.
- Control over Discounts:
- If discounts are provided, ensure that there are controls to authorize and record these discounts properly. Uncontrolled or unauthorized discounts can lead to loss of revenue.
- Tills and Accumulation of Cash Sales:
- Use tills that accumulate total sales during the day, and reconcile the cash in the till with the sales records at the end of each day. This helps identify discrepancies between cash collected and sales recorded.
- Reconciliation of Cash:
- Implement regular and independent reconciliations of cash sales with bank deposits. All cash received should be deposited intact, and the garage should maintain records to reconcile cash sales to bank statements.
- Cash Security:
- Ensure that cash is stored securely in a safe or locked drawer before banking. The garage should have procedures to limit access to cash and safeguard against theft or loss.
- Control over Returns and Refunds:
- Establish controls over returns and refunds to ensure that they are properly authorized and documented. Cash refunds should be reconciled with sales records to avoid manipulation.
- Proprietor’s Oversight:
- The garage proprietor should exercise control over the business by reviewing daily or weekly sales reports, reconciling them with cash received, and conducting spot checks to ensure compliance with procedures.
- Simplified Procedures for Non-Administrative Staff:
- Ensure that administrative duties, such as recording cash sales, are not too complex for non-administrative staff, such as mechanics, to handle. Procedures should be straightforward to reduce errors.
- Tags: Cash Sales, Control Systems, Internal Control, Risk Management, Sales Procedures
- Level: Level 2
- Uploader: Dotse