12.2 Cash Controls: Receipts, Disbursements & Petty Cash

Cash is the bookkeeper's highest-custody asset

Noncash schemes steal parts. Cash steals itself: it is fungible, easy to pocket, and gone before anyone finishes the bank rec. AIPB's employee-theft sections emphasize inventory, hiring, and fidelity bonds for employees who have access to cash. This section is the cash-handling layer every bookkeeper in an "up to 100 employees" firm must be able to install: receipts, disbursements, and petty cash. Check forgery, positive-pay exception handling, and customer check fraud get their full treatment in Chapter 13; positive pay is named here only as a forward pointer.

Maple Ridge HVAC Supply collects about $8,400 of customer checks in a typical Monday mail. Jordan, the bookkeeper, also records AR and sometimes walks deposits to the bank. That pairing is already a custody plus recording collision. The rest of this section is how to pull those hands apart without pretending a 35-person wholesaler has a corporate treasurer staff.

Cash receipts: dual custody, endorsement, deposit intact, lockbox

Dual custody of mail receipts. Two people open the mail together. They list every check—payer, amount, invoice numbers—on a remittance log. One copy goes to Jordan to post AR from the list. The checks themselves go to the person who prepares the deposit, not back to Jordan. If one receptionist opens mail alone, steals a $1,200 check, and never lists it, AR stays open until the customer calls. If that same person also posts AR, they can lap the account or write it off.

Restrictive endorsement immediately. Stamp each check For Deposit Only — Maple Ridge HVAC Supply — Account #### before it leaves the mail table. A blank endorsement, or "Maple Ridge" without "for deposit only," lets a thief negotiate the item. Restrictive endorsement does not stop an unlisted check from being deposited to a look-alike account; the log, dual custody, and a bank rec by someone else still matter. Customer check alteration and counterfeits are Chapter 13.

Deposit intact. The $8,400 that arrived Monday is the $8,400 that hits the bank the same day. Nobody "makes change" from the deposit, borrows $80 for the postage box, or holds a check in a desk until the customer "clears." Lapping starts when a receipt is not deposited and is later covered by the next customer's check. Daily intact deposits plus a bank reconciliation prepared by someone who does not handle cash (the Chapter 4 skill used as a control) close that window.

Lockbox. Customers mail remittances to a bank lockbox. The bank opens, endorses, deposits, and sends Maple Ridge a data file and images. Jordan posts AR from the bank file and never touches paper checks. Lockbox is dual custody outsourced. The cost is a bank fee. The benefit is removing the bookkeeper from custody. Firms that cannot buy a lockbox still need two people at the mail table.

Over-the-counter cash. Counter sales of filters need a POS or register tape, prenumbered receipts, and a cashier who cannot void sales without a manager key. End-of-day cash-out versus the tape is an independent check. Skimming—a cash sale never rung—is cousin to unconcealed larceny: no document, missing cash.

Lapping, one Monday. Customer A pays $1,200. Jordan pockets the check. Tuesday, Customer B pays $1,200; Jordan posts B's check to A's invoice. Wednesday, C covers B. The bank rec still "works" if deposits equal listed checks. Dual custody plus posting from a list Jordan did not create breaks the chain. Enforced vacation (Section 12.3) is what makes the chain visible when paper controls were ignored.

Cash disbursements: prenumbered checks and two signatures

Blank check stock is inventory of cash. Keep it locked. Use prenumbered checks and account for voids (write VOID across the face and keep the physical check). A gap in sequence 4401–4410 with no void is a red flag that 4407 may have left off-books.

Two signatures above a threshold. Maple Ridge requires two signatures on checks of $2,500 or more, and owner approval to add a vendor. Jordan may prepare the check; Pat must sign large items. Dual signatures fail if the second signer never looks at the invoice, or if a signature stamp lives in Jordan's drawer. Supporting documents—purchase order, receiving report, vendor invoice—travel with the check. After payment, stamp PAID so the same invoice cannot be recycled next week. Full three-way match and fake-vendor schemes are Chapter 13; here you only need the triangle: the person who adds vendors is not the only person who holds check stock and posts AP.

Worked disbursements on September 22, 2026:

• Check 4412 to Arctic Parts for $3,180 (compressors received against PO 778). Amount is above $2,500, so Pat and the operations manager both sign. Invoice, receiving report, and PO are attached, then stamped PAID.
• Check 4413 to Office Depot for $86 of paper. One authorized signature is enough under the policy. Still prenumbered; still filed.
• Check 4414 VOID after a printer jam. Void retained in sequence.

Positive pay (forward pointer). Positive pay is a bank service: Maple Ridge uploads a file of checks it issued (number, date, payee, amount); the bank pays only those items and holds mismatches for review. It is one of the systems that prevent check fraud AIPB lists in the next workbook section. Do not confuse it with dual signatures. Dual signatures are an internal disbursement control. Positive pay is a bank match against issued items. Payee positive pay, ACH fraud, and forged company checks: Chapter 13.

Electronic payments. ACH and bill-pay need the same SOD: the person who initiates a $6,000 vendor ACH is not the only person who adds payees in the bank portal. Dual approval in the portal is the electronic version of two signatures.

Petty cash: imprest fund, vouchers, replenishment entry

A petty cash imprest fund is a fixed amount of cash on hand for tiny purchases that should not each become a check. Maple Ridge sets the fund at $300.

Establish the fund:

Debit Petty Cash $300
Credit Cash $300

The custodian is the office manager, not Jordan. Every disbursement takes a voucher: date, amount, business purpose, attached receipt, recipient signature. The custodian does not approve a $90 "shop supplies" purchase to themselves without a second look. The box is locked.

Imprest identity: at every moment,

Petty Cash ledger $300 = currency in the box + vouchers in the box (plus or minus cash over or short).

On replenishment day the box holds $12 cash and $285 of vouchers. $12 + $285 = $297, so there is a $3 shortage—cash taken without a voucher, or a lost slip.

Replenish by writing a check to petty cash (or to the custodian) for the amount needed to restore $300. Do not peel bills off Monday's undeposited customer checks. That would break deposit intact and mix receipts custody with the box.

Replenishment journal entry:

Debit Postage Expense $48
Debit Shop Supplies Expense $112
Debit Delivery Expense $85
Debit Meals Expense $40
Debit Cash Over and Short $3
Credit Cash $288

Trap: debiting Petty Cash $288 on replenishment. The Petty Cash asset stays $300 until you change the imprest size. Replenishment hits expenses (and over/short) and operating cash.

Trap: no vouchers, receipts in a coffee mug. That is a slush fund, not an imprest system.

To increase the fund to $500: debit Petty Cash $200, credit Cash $200. To decrease or close it: debit Cash (and remaining expenses), credit Petty Cash.

Who does what. Jordan records the replenishment from reviewed vouchers. Pat signs the $288 check. The custodian cannot post the general ledger. Pat's surprise count of the box is an independent check. If Jordan were custodian, recorder, and check signer, petty cash would be a pocket.

Exam traps: (1) replenishing the box from the day's deposits; (2) debiting Petty Cash when replenishing an imprest fund; (3) one person opens mail, posts AR, and takes the deposit; (4) treating positive pay as fully taught in this chapter; (5) unrestrictive endorsements; (6) dual signatures implemented as a stamp in the bookkeeper's desk; (7) skipping voids in the check sequence.