CASH IN HAND

In a Balance Sheet all the under mentioned cash balance are included under the above head :

  1.  cash balance in hand;
  2. petty cash balance in hand;
  3. balances of stamps in hand;
  4. cash in transit;
  5.  cash at branches; and
  6.  cash with agents;

The first three of the above mentioned are verified actual count. The cash in transit and that with branches and agents is verified from documentary evidence available in regard thereto and the advice in respect of their subsequent remittance in whole or a part. Special care is necessary in regard to verification of cash balances for unless they are checked surprise there can be no certainty that the cash produced for inspection was in fact held the custodian. For this reason, the cash should be checked not only on the last day of the year, but also checked again some time after the close of the year without giving notice of the auditor’s visit either to the client or to his staff. If there are more than one cash balances, e.g., when there is a cashier, a petty cashier, a branch cashier and, in addition, there are imprest balances with employees, all of them should be checked simultaneously, as far as practicable so that the shortage in one balance is not made good transfer of amount from the others. It is desirable for the cashier to be present while cash is being counted and he should be made to sign the statement prepared containing details of the cash balance counted. If he is absent at the time the cash is being verified, he may hold the auditor responsible for the shortage, if any, in cash. Such an attempt is known to have been made in the past. If the auditor is unable to check the cash balance on the date of the Balance Sheet, he should arrange with his client for all the cash balance to be banked and where this cannot conveniently be done on the evening of the close of the financial year, it should be deposited the following morning. The practice should also be adopted in the case of balance at the factory, depot or branch where cash cannot be checked at the close of the year. In case this is not possible, the auditor should verify the receipts and payments of cash upto the date he counts the cash. This should be done soon after the cash balances have been counted. The Cash Book of the day on which the balance is verified should be signed the auditor to indicate the stage at which the cash balance was checked. If any cheques or drafts are included in cash balance, the total thereof should be disclosed. If there is any rough Cash Book or details of daily balance are separately kept, the auditor should test entries from the rough Cash Book with those in the Cash Book to prove that entries in the Cash Book are correct. If the auditor finds any slip, chit or I.O.U.s in respect of temporary advances paid to the employees included as part of the cash balance he should have them initialed a responsible official and debited to Appropriate Accounts.

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