14.1 Cash Receipts, Payables, Deposits & Bank Reconciliation

Follow a transaction from start to finish

Property accounting is reliable only when source documents, authorization, custody, recording, bank activity, and review agree. A manager should be able to trace a resident payment or vendor invoice through the full cycle and explain every exception. Controls protect the client and residents, produce usable reports, and deter or detect error and fraud.

The four core functions are:

• authorization — permission to approve a lease adjustment, purchase, invoice, refund, or payment;
• custody — possession of cash, checks, cards, bank credentials, blank check stock, or negotiable items;
• recording — entering the transaction in the resident ledger and general ledger; and
• reconciliation/review — comparing independent evidence and investigating differences.

Ideally, different people perform incompatible functions. The person who receives money should not also post, deposit, reconcile, and approve write-offs without independent review. Small properties may lack enough staff for complete separation. Use compensating controls such as owner review of bank statements delivered directly by the bank, supervisor review of deposit detail and adjustments, dual approval for electronic payments, and periodic surprise review.

Collections and deposits

Use approved payment methods and issue a system receipt or other required acknowledgment. Restrict cash when client policy permits because cash has higher custody risk. Never use incoming collections to pay an expense before deposit. Record the payer, property, resident account, date, amount, method, and purpose, then secure funds until deposit.

Deposit intact and on the schedule required by law, management agreement, and policy. “Intact” means the amount deposited agrees to collections; it is not reduced by petty-cash spending or check cashing. Compare the daily receipt report, physical or electronic payment evidence, deposit confirmation, and ledger posting. Investigate missing receipt sequences, reversals, charge deletions, backdating, unidentified cash, returned payments, and delayed deposits.

Electronic portals reduce physical handling but create other controls: administrator rights, multifactor authentication, bank-account-change verification, interface reconciliation, refund approval, and phishing defenses. A resident's screenshot is not conclusive evidence that the property received settled funds.

Security deposits and other regulated funds may have account, interest, notice, transfer, or timing rules that vary by jurisdiction. Follow the applicable requirement and property documents; do not describe every client account as a statutory “trust account” or assume one universal commingling rule.

Accounts payable

A controlled payable begins before the invoice. Verify vendor setup, tax and insurance documents as required, conflict disclosure, contract or approved purchase order, budget authority, and spending limit. Changes to vendor bank instructions require independent verification through a trusted contact method, not a reply to the same email requesting the change.

Use a matching process appropriate to the purchase:

1. approved contract, work order, or purchase order;
2. evidence that goods or services were received and accepted; and
3. vendor invoice with correct entity, property, amount, terms, and tax.

Code the expense to the proper property, account, department, and period. Check calculations, retainage, credits, deposits, sales tax treatment, and duplicate invoice numbers or amounts. The employee confirming work should have enough knowledge to verify completion. The person who entered a vendor or invoice should not be the sole payment approver.

Emergency work may follow a defined exception process, but “emergency” is not a blank check. Protect people and property, document the facts and authority, control cost when feasible, notify the client, and complete after-the-fact review.

Disbursement controls

Payments should follow the approval matrix. Protect check stock, signature devices, banking tokens, and user roles. Never share credentials. Positive pay, payment limits, dual approval, and bank alerts can reduce risk. Review the payee, amount, property, supporting invoice, and change history before release.

Refunds, concessions, deposit dispositions, write-offs, and credit-balance payments deserve special attention because they can be used to conceal diversion. Require support and approval independent of the initiator. Reconcile subsidiary resident and deposit records to the general ledger.

Bank reconciliation

The book balance rarely equals the bank statement balance before reconciliation because of timing. Start with an independently obtained statement. Compare every cleared deposit and payment with the ledger. Account for deposits in transit and outstanding checks, investigate bank fees, interest, returned items, unauthorized debits, stale checks, and voids, and record legitimate adjustments.

A valid reconciling item has a clear source and expected resolution. Do not carry an unexplained “plug” from month to month. The preparer dates and signs the reconciliation; an authorized reviewer examines the statement, reconciliation, outstanding-item aging, unusual payees, transfers, and subsequent clearing, then documents review.

Example

Ledger cash is $84,600. The bank shows $80,250, with a verified $7,000 deposit in transit and $2,650 of outstanding checks. Adjusted bank balance is $80,250 + $7,000 - $2,650 = $84,600, agreeing with the ledger. If the manager instead adds an unsupported $4,350 “difference,” the reconciliation has failed.

Exam approach

Choose the answer that preserves source evidence, separates incompatible duties, verifies authorization and receipt, deposits intact, investigates exceptions, and obtains independent review. Convenience or trust in a long-serving employee never replaces control.