Define internal controls (this goes for both the cash and accounts receivable accounts).?

Answer 1

Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
* Effectiveness and efficiency of operations.
* Reliability of financial reporting.
* Compliance with applicable laws and regulations.

First rule of internal controls
The first, and primary, rule is to have more than one person handle financial procedures. In small fee shops, this is often very difficult. However, the owner can re-view the bank statements and all canceled checks before any employee sees them, and can keep a manual cash log. Neither of these tasks takes much time. A forged signature on a check for supplies and deposits that doesn’t match the cash log can be easily seen.
Every embezzlement starts with a breach of internal controls.

Control cash receipts
Here are a few simple rules:

Have someone other than the bookkeeper open the mail and list all cash receipts.
Have all checks endorsed "for deposit only" with a company stamp at the time the mail is opened.
Keep the cash handling and record keeping separate.
After all cash receipts have been listed by someone else, have the bookkeeper immediately record them.
Compare the listing of cash receipts with the cash receipts journal and deposit slips.
Deposit cash receipts in the bank every day.
Post cash receipts to accounts receivable ledgers promptly.
Controlling cash disbursements

Make all disbursements by check (other than petty cash).
Prenumber all checks and account for them.
Use a check protector for all checks.
Sign checks only if adequate documentation is presented.
Have only higher-level personnel sign checks (never the bookkeeper!).
Prohibit checks payable to cash.
Mail checks independently of the accounts payable function.
Prepare bank reconciliations.
Keep petty cash in a safe place.
Do I really need fidelity bonds?
Fidelity bonds on employees in positions of trust, such as book-keepers, is an insurance policy. You have other business insurance, such as E&O, liability, fire, etc.
Relatively few businesses have fidelity bonds, even though the risk of employee theft is much higher than the risk of a fire loss.
You may have to shop around for coverage, as most insurance agents don’t sell it often. The policy must be adapted to your business.
Employers sometimes resist bonding because they think their employees will be offended. Presenting it as part of the company’s overall business insurance cover-age can minimize adverse reactions.
The idea for this article came from an appraisal company that had serious financial trouble due to embezzling!

Answer 2

Sorry Amanda - this is not a homework cheat site. Please do your own homework.