What is the primary purpose of maintaining internal controls over cash receipts and payments?

• A. Eliminate cash receipts to avoid theft.
• B. Ensure cash is properly recorded, safeguarded, and deposited; reduces misappropriation risk.
• C. Increase cash balances by delaying deposits.
• D. Allow unrestricted access to cash by departments.

Answer: (B)

The main idea is protecting the cash asset by making sure it is recorded accurately, kept secure, and deposited promptly. Internal controls over cash receipts and payments create a system that prevents and detects errors and theft: separating duties so the same person cannot handle cash and record it or reconcile it, using physical safeguards for cash, and requiring timely bank deposits with independent reconciliations. When cash handling, recording, and banking steps are clearly defined and monitored, the opportunity for misappropriation is greatly reduced and financial records stay reliable. Eliminate cash receipts, delay deposits, or give unrestricted access would undermine protection and accuracy, which is why those options don’t fit.