The importance of a control system within the business.

1116 WordsNov 17, 20055 Pages
Internal controls are methods or procedures adopted in a business to: -Assist in achieving the businesses' objectives - Ensure financial information is correct and reliable - Ensure cooperation with all operational and financial requirements - Protect its Assets They are essentially checks and balances within a business. It's objective is to reduce errors, limit financial losses and prevent fraud. They also segregate duties within the company and limit one persons control over an entire area. For example- never have one person writing, receiving and reconciling your business accounts. As the owner of Millennium Land Developers, it is your responsibility to ensure that the business has a good internal control system. As they flow…show more content…
After deciding what is required to prevent the occurance of the event, detect if any event has occurred and to reduce impacts upon the business. The records of these events will be used in case anything like this ever happens and can be identified to act on the situation. As the owner, you have the responsibility and accountability for the effectiveness of the internal control system. Bank reconciliation statements enable the business to compare the business bank account records to the bank's records of the accounts balance in order to uncover any possible mistakes. Because there is a difference between the time data is entered into the bank system and when data is entered in the individual's system, there are sometimes a difference between account balances. The goal of reconciliation is to determine if the difference is due to error rather than timing. I highly recommend to do a bank reconciliation monthly as you can be more confident that your current records are correct and it is easy for your tax agent to prepare the businesses income tax return or activity statements faster. Any extra transactions that go through the accounts can go through unchecked and end up costing the business money. Such as: Interest charges, bank fees or direct credits or debits. A cash budget is an estimate, for a future period of cash receipts and cash payments. The cash budget shows how in the future you will be able to pay any debts and expenses. A properly
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