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A bank is a good cash control because it limits employees' access to company assets and provides documentation on withdrawals and deposits.
Describe why a bank is one of the best internal controls a business can use
Internal controls are meant to ensure that a business's assets are protected, that its financial data is accurate, and to ensure efficiency.
Most banks keep "signature cards" on hand for business accounts so its tellers are aware of who can sign checks to withdraw funds. All other individuals are prevented from withdrawing cash from the business's account.
The bank generally sends the business a monthly statement summarizing the activity related to cash. The statement will generally also include the documentation related to each transaction.
Using a bank is one of the best internal controls on a business's cash. Internal controls are meant to ensure that a business's assets are protected, that its financial data is accurate, and to ensure efficiency . For cash, this generally requires that the people with the ability to obtain a business's cash are limited to a few select individuals and that each transaction is recorded in detail. The documents regarding each transaction should list when each deposit or withdrawal took place, who initiated the transaction, and how much cash was involved.
As an independent third party, a bank is less susceptible to schemes by a business's employees to steal funds. Since a bank holds a business's funds, it provides a physical barrier preventing employees from accessing the cash. Most banks keep "signature cards" on hand for business accounts so its tellers are aware who can sign checks to withdraw funds. All other individuals are prevented from withdrawing cash from the business's account.
Banks generally require that every deposit is accompanied by a signed and dated deposit slip. Every withdrawal must be paired with a signed and dated check. These documents are kept by the bank to resolve any disputes that may arise regarding a transaction.
The bank generally also sends the business a monthly statement that summarizes the activity associated with the account. This statement will list all deposits and withdrawals. It will also include a copy of each transaction's documentation. Generally, the person in charge of the business's books will receive this documentation and compare it to the business's own records. If there are any differences between the business records and the bank's, the company can use the documentation enclosed with the statement to determine where the discrepancy is and contact the peopled involved with the questionable transactions.