Internal

Control

53 | P a g e

Internal Control
This is a process, effected by an entitys board of directors,
management,

other

personnel

designed

to

provide

reasonable

assurance regarding the achievement of the objectives in the

following categories: (a.) reporting, (b.) operations, and (c.)
compliance. ( Whittington, CPA PhD, 2014)
This is essential given that the primary goal of an entity is to
earn profit and have it presented accurately. Though internal
control will not give absolute assurance, this will be a means
of avoiding and minimizing errors, misstatements, collusion and
other forms of fraud with the aid of the managements strict
disposition as to the implementation of the procedures that they
will set. This is a must also to avoid irregularities in the
business operation and recording procedures. Internal control,
even in small businesses can be designed to properly achieve its
goals and comply with what the law requires.
This

section

account and

will

include

policies

and

procedures

transaction of the business

to

for

each

lessen the risks

inherent or not to the business and ensure proper, complete and

accurate
assets

recording
by

of

integrating

each

transactions,

approvals

from

to

the

safeguard
management,

their
and

maximize its resources as to allocation of it.

54 | P a g e

ASSETS
CASH
CASH RECEIPTS
Change fund
1. An amount of

Php2000 will be maintained as

change fund

which shall be used only as a change for the sales of the

entity.
2. At the end of the day where a cash count is being done, the
change fund must be separated first and be kept on the cash
box which will be locked at the end of the operating day.
3. Only the cashier and the manager have the copy of the key
to such cash box and the copy of the cashier shall be
surrendered to the manager at the end of the day.
Cash Sales
1. The only person authorized to accept payment from sales is
the cashier. He will be fully responsible for safeguarding
it in the cash box in the front desk of the business situs.
2. Before receiving the payment from the customer, he shall
check the inventory prepared by the store personnel. Upon
checking the items and finding out that it is in accordance
with what the buyer wants, he will receive the payment.
Upon

receiving

customer

for

copies

of

given

to:

it,

he

will

verification.

pre-numbered
(OR

1)

mention
He

Official

customer,

will

its
then

Receipts
(OR2)

amount

to

prepare
which

three

will

bookkeeper,

the
be

(OR3)

temporarily kept by him for the day for the preparation of

the

Daily

Cash

Collection

Report

and

to

be

forwarded

thereafter to the Manager.

55 | P a g e

a. If the amount given is more than what is due, the

cashier will give the OR to the customer with the
change. The change shall be counted in front of the
customer for verification of its correctness.
b. If the customer gave the exact amount, then the OR
will be given and verify to the customer that the
amount due is equal to what was given to him.
3. The cashier is obliged to issue 3 copies of pre-numbered
Official Receipts in every cash sales to ensure that all
collections will be recorded. The purpose of having prenumbered document are the following:
a. The number indicated can be used as a reference for
easy tracking of transactions made.
b. Assurance that all collections and transactions are
processed and recorded.
c. In

case

certain

when

the

number

investigated,

stored

in

checking

the

copy

does

sequence,

whether

it

not

include

it

shall

was

a
be

cancelled

document, omitted, or a lost document.

PROCEDURE IN LOOKING FOR CERTAIN OFFICIAL RECEIPT WITH
A NUMBER NOT INCLUDED IN THE DCCR
i.

Upon noticing that a certain number was not in the

records the bookkeeper should approach the manager
and look for it in the cancelled ORs.

ii.

If it was not found there, the bookkeeper will check

whether it was just omitted by checking the valid
ORs in the cabinet of the Manager, of course this
must be done after asking for permission from the
manager.

56 | P a g e

iii.

If after such it was not found, it may be considered

as an OR with payment lost or was kept intentionally
by the cashier. If this was proven to be true, this
will be considered as a grave offense since it is
dishonesty,

so

the

company

should

immediately

terminate the cashier.

4. At the end of the day, the cashier will prepare two copies
of DCCR based on the copy of Official Receipts that he had
kept in another drawer beside the cash box. The first copy
is to be given to the bookkeeper for recording purposes and
the other copy will be kept by the manager which will serve
as a reserve copy just in case the other copy was lost by
the bookkeeper.
a. After the preparation of the DCCR, he with the Manager
will conduct cash count including the change fund and
will tally it with the DCCR plus the change fund of
2000.
PROCEDURE FOR THE CASH COUNT
1. The cashier should properly segregate the bills per
amount.
2. The manager will be the one to do the counting of
the

money.

The

Php

2000

change

fund

should

be

separated first, then do the counting for the sale

for the day.
3. After the counting of cash, he will then total the
amounts indicated in the Official Receipts. The ORs
should be checked one by one in accordance with its
number (given that the ORs are pre numbered). This
57 | P a g e

is

important

to

assure

the

completeness

of

the

transactions that was recorded in the DCCR. And the

manager should also check the first number of the
unused OR. Checking of the first number of unused OR
is

must

presented

to

check

and

whether

included

by

all

issued

ORs

the

cashier

were

in

the

preparation of the DCCR.

a. If amount of cash tallied with the total amount
of the aggregate of ORs then the Manager will
sign

the

DCCR.

This

is

to

ascertain

that

the

Manager conducted the cash count and found out

that it tallies with the collection for the day.
i. He will then get the money net of change fund
which he himself will deposit in the bank. The
depositing

of

the

cash

collection

should

be

every other day at the start of the operating

business of the bank to prevent using of it for
unauthorized expenditures and to also safeguard
cash

from

the

threat

of

theft.

validated

deposit slip must be acquired by the manager

upon depositing and shall be forwarded to the
bookkeeper for recording.
ii. The

bookkeeper

upon

recording

it

shall

photocopy it and return the original copy of

validated

deposit

slip

to

the

manager

for

safekeeping.
iii. The

change

fund

will

then

be

kept

by

the

cashier on the cash box and lock it before he

leaves. After locking it, he shall give the
copy of key that he has to the manager. This is
important as a way also of safeguarding the

58 | P a g e

change

fund

from

possible

irregularities

and

fraud.
b. If after the cash count, the manager found out
that there is a discrepancy, may it be overage or
shortage, certain procedures shall be done.
i. If there is shortage, meaning the cash on hand
is lower than the total amount derived from
the total amount indicated in ORs, they will:
1. Conduct a cash recount to verify it.
2. If after that it still did not tally, he
will charge it to the salary of the cashier.
Since the cashier is the only one allowed to
access the cash box, the discrepancy could
only be caused by his possible carelessness,
so it is justifiable to deduct it from his
salary.

This

is

way

of

discouraging

irregularity in the cash collection.

3. The certain offense shall be documented by
the Manager, issuing an offense slip which
will be compiled in the cashiers folder.
4. Once the error was committed three times,
the manager shall decide to terminate the
cashier since there can be possible fraud
that is happening. This condition shall be
included in the contract of employment with
the cashier to validate such rule.
5. To avoid this, the manager could install
CCTV camera facing the cash box to ensure
that theft would be not an option to the
cashier.

59 | P a g e

ii. If there is an overage, where the total cash

on hand was more than the recorded aggregate
of the OR:
1. The Manager should recheck whether all the
ORs issued are included in the DCCR first.
2. If after that still theres a discrepancy,
the Manager will check the Inventory Report
of the Assistant manager and look for the
number of inventories that went out of the
stock

room

After

knowing

equivalent

and

were

sold

such,

amount.

he

for

will

This

that

day.

compute

procedure

is

its
to

check whether there were sales wherein an

OR was not issued.

In order to prevent Sales without OR

to happen:
The

customer

should

demand,

at

all times, the receipt.

Since the manager is always ** in
the

business,

the

goods

or

before
before

packaging
discharging

the goods to the customer, either

one of the assistant manager or
the

manager

should

check

the

goods whether it is in accordance

with the OR issued.
3. If after the checking of inventory report
it

did

not

tally,

will

be

Upon

deciding

the

considered
it

of

overage

miscellaneous

income.

to

amount
be

miscellaneous

income, the manager should note it in the

60 | P a g e

DCCR

that

there

is

an

overage

and

its

amount indicating it to be a miscellaneous

income.
5. Other Cases
a. Erasures in the issued OR are highly discouraged, so when
an error is committed in the preparation of the OR it
shall be cancelled.
PROCEDURE FOR CANCELLATION OF OR
1. The cashier upon committing error, which includes
(a.) erasures
(b.) wrong amount or item indicated therein and
(c.) alterations made,
in preparing the OR shall forward the 3 copies of
ORs prepared to the Manager for cancellation.
2. The manager will then check whether the OR that will
be cancelled is really an OR based on the sale not
yet paid by asking customer about the error. After
checking such, he shall stamp the 3 copies of ORs as
cancelled with his affixed signature on it.
3. All copies of OR that was marked cancelled must be
retrieved

by

the

cashier

and

must

be

stapled

together to make sure that any copy would not be

lost.
b. The

manager

middle

of

shall

conduct

operating

day

to

surprise
check

cash
the

count

in

the

consistency

and

honesty of the cashier in terms of collection. This is an

effective control of cash since when a surprise count is
made the cashier will be motivated to honestly record and
process cash transactions.

61 | P a g e

c. When the key of the cashier is lost, the manager will use
his copy to open the cash box and will immediately change
its lock for that same day. This is a way of preventing
possible theft that may arise, considering that the lost
key may be in the hands of one of the employees or other
person outside the entity who may use such in committing
theft.
COLLECTION OF SALES ON ACCOUNT
1. The entity can encourage its debtors/customers, especially
those which involves large amount of debts to directly pay
in the bank and just present the validated deposit slip to
the cashier for recording purposes. Doing so would decrease
the risk of theft and irregularities on cash collection.
With the aid of the bank, cash collection would be more
effective since the money will no longer be in the hands of
the employee which can be concealed to already be received.
The tendency of allowing the cashier to collect has the
possibility of understating the collection for his personal
use.
2. If

the

debtor

wants

to

pay

to

the

entity,

the

payment

together with the sales invoice shall be presented to the

cashier.

If

the

customer

doesnt

have

the

invoice

with

them, the cashier will proceed to the bookkeeper to look

for the A/R subsidiary ledger pertaining to the client and
ask whether in which among the debts (in case where there
are several debts), the payment will be applied.
3. When the certain debt was identified, the cashier will go
back

to

the

bookkeeper

to

look

for

the

related

sales

invoice in such debt.

a. Upon receiving the payment, the cashier shall stamp the
invoices as paid indicating also the date of payment
62 | P a g e

and initials of the cashier. This is a way of preventing

unrecorded collection from the customer and which will
also aid in tracking the current balance of each debtor.
b. The stamped invoice will then be returned to the customer
and other two will be returned to the bookkeeper and the
manager.
c. The collection from sales on account should also be part
of the DCCR prepared for the day evidenced by the copy of
sales invoice that was stamped as paid.
Cash in Bank
1. Cash collected as stated above is being deposited intact in
the bank.
2. Only the manager can let someone withdraw from the bank.
3. Only the manager is authorized to deposit the collection
for the day and authorized as a signatory to checks used
for payment of expenses.
4. The bank shall send a bank statement every month. The only
person authorized to receive such is the manager.
5. Bank reconciliation should be conducted every month by the
bookkeeper.
PROCEDURES IN CONDUCTING BANK RECONCILLIATION
1. All source documents related to cash in bank must be
compiled.
2. All deposits in the bank should be checked whether it
came

from

the

deposit

of

the

manager

or

deposit

of

customers. Validated deposit slip must be the reference

for deposits. In case when a customer deposited and the
entity was not notified by sending the validated deposit

63 | P a g e

slip, the bookkeeper should record such deposit. That is

considered as a credit memo.
3. In case when a certain deposit made by the entity was not
recorded

by

the

bank

because

the

bank

statement

was

prepared earlier before the deposit was made, the entity

should notify the bank. This is an example of deposit in
transit.
4. In

case

when

deposit

was

made

by

unknown

person,

generally neither one of the customers or the manager,

the entity should also inform the bank because a deposit
for

another

account

might

have

been

credited

to

the

account of the entity.

5. The checks indicated as withdrawal from the bank should
be tallied from what is recorded in the check register.
6. In

case

when

check

issued

by

the

manager

was

not

included in the list of withdrawals made by the entity or

a vendor, the bank must be notified because probably the
bank statement was prepared a head of the withdrawal of
the entity. This case is called outstanding checks.
7. Once a certain check not included in the check register
debited to the account of the entity by the bank, such
check should be doubled check by the bank. It may either
be a check that should be debited from other accounts or
a

check

really

issued

by

the

manager

that

was

not

recorded by the bookkeeper.

8. Bank charges should be recognized and recorded by the
bookkeeper.
9. When

checking

the

balances

and

certain

error

was

committed, certain adjustments should be made either by

the bank or the book.

64 | P a g e

CASH DISBURSEMENT
CONDITIONS INDICATING WHEN TO PAY FOR ITS PURCHASE ON ACCOUNT:
b. The debt must be due.
i. The

manager

is

in

charge

of

managing

its

debts.
ii. He

shall

monitor

each

debt

and

must

know

when it is due and decide when it should be

paid.
c. If

there

are

discount

indicated

in

the

negotiation, the discount term will be considered

and shall be the preferable date of payment.
ii.

When these conditions are met, the Assistant Manager

shall

be

given

the

errand

to

prepare

the

Cash

Disbursement Voucher, which he will forward to the

Manager for approval together with the related the
invoice,

receiving

approval

is

report

way

of

and

approved

controlling

PO.

Such

disbursements,

avoiding unauthorized payments which may not really

be for valid expense.
iii. The manager shall check the documents stated above
whether they are matching or not before approving
the CDV and issuing check.
iv.

Once the CDV is approved, the one who is responsible

about issuing check is the manager. He is the only
person

authorized

to

issue

checks

to

also

avoid

unauthorized expenditures and cash outflow. He will

also be the one to directly give that check to the
supplier.
a. Upon payment, the Manager should not forget to
present the copy of the entity of the invoice
65 | P a g e

initially

issued

by

the

supplier

when

the

delivery was made, and ask the supplier to stamp

it as paid.
b. The stamped invoice then should be forwarded to
the bookkeeper for recording.
c. The bookkeepers basis of recording should always
be a stamped or noted as paid Invoice or an OR if
there is. Documents should not be photocopied, or
if there is, the original copy should also be
presented to him. If not, he shall not recognize
it.

After

recording,

he

shall

forward

the

documents namely; approved PRF, approved PO and

stamped as paid Invoice attached to each other,
to the Manager for safe keeping.
d. The manager will put all documents in a cabinet
in his office according to the transaction and
its

number.

Related

document

with

should

be

attached with one another.

General Disbursements
1. The

only

person

authorized

to

receive

bills

is

the

Assistant Manager. He will also be the one to prepare the

related pre-numbered CDV for such expense.
2. Upon

preparing

approval.

This

the

CDV

is

he

must

shall

ask

as

way

for
also

the
of

managers
avoiding

unauthorized disbursements by way of separating the custody

and authorization in such transaction.
3. The Manager should check the indicated amount in the CDV
whether it is in accordance with the bill received by the
Assistant Manager.
a. If on the process of checking it, the manager noticed
that it is not in accordance with the bill, he should
66 | P a g e

not

approve

the

CDV

and

cancel

such

document

by

stamping it cancelled. He will then ask the Assistant

Manager to prepare another CDV.
b. If

it

was

approved,

he

will

issue

the

check

and

forward it to the assistant manager to pay the related

expense.
4. Upon payment, the assistant manager should not forget about
asking for the related OR or Invoice and present such to
the bookkeeper for recording.
5. Another option can be made in terms of payment, if the
creditor

has

depositing
assistant

in

bank

account

their

manager

bank

can

and

they

account

just

pay

are

as

through

recognizing

payment,
bank

and

the
just

present the validated deposit slip to the creditor after

the bookkeeper records it.
6. Recording

made

by

the

bookkeeper

must

be

based

on

the

original copy presented by the manager and they must have a

photocopy of it.
PAYROLL
1. Separate folders for each employee must be maintained and
kept. All information about the employees must be placed
intact there such as the following:
a. Personal information
b. Requirements submitted upon application
c. Contract

made

conditions,

with

rules

and

the

employee

regulations

where
are

certain

stated

for

agreement
d. The job description of the employee
e. The

change

in

position

evidenced

with

letter

prepared by the Manager

f. A change in rate of salary if there are any
67 | P a g e

g. Offense slips as a proof of committing offenses made

by the manager with his specimen.
Maintaining such will aid in checking the accuracy of the
salary of the employees.
2. DTR must be handled by the Manager.
a. The form must be placed on the table of the manager.
b. Every time an employee comes to log in and out, the
Manager must check whether the time indicated there in by
the employees are accurate.
c. At the end of the day the DTR will be forwarded to the
Assistant

Manager

for

the

preparation

of

Payroll

Register. The DTR forwarded to the Assistant Manager must

be signed by the Manager.
3. Upon the preparation of the Payroll register, it shall be
forwarded to the manager for approval. The manager should
check all the computations made, also assuring that the
correct rate was used, and accurate deductions were made.
The manager should check it with reference to the DTR and
separate folders of each employee as to the rates used.
4. After the approval of the payroll register, the assistant
manager will prepare the CDV which is also subject to the
approval of the manager. Certain approvals must be made to
assure the accuracy of the amounts indicated in the forms.
5. In

approving

the

CDV,

the

manager

should

check

the

consistency of the amount indicated there with the approved

payroll register.
6. Upon

approval

manager

and

of
be

the
given

CDV
to

check
the

should

assistant

be

issued

manager

by
for

encashment.

68 | P a g e

7. After the assistant manager encashed the check, he will

forward the cash to the manager for the distribution of the
payroll. Only the manager can distribute it.
8. As an employee receives his wage or salary, he shall fill
out and sign in the payroll receiving form which is the
proof

that

the

employee

receives

his

salary.

This

is

important to avoid double payment to the employees.

9. Unclaimed salaries should be kept by the manager in his
drawer placed in a separate folder labeled with the names
of the employees who havent claimed their wage or salary.
Included

also

register

which

in

the

will

folder
be

the

is

basis

copy
of

of

the

payroll

distributing

the

unclaimed cash.
10. Source

documents

should

be

such

forwarded

as
to

approved
the

PR

and

bookkeeper

approved
for

CDV

recording

purposes
Petty Cash Fund
11.

The petty cash custodian is the cashier who is the

only one who can access the petty cash box containing petty
cash fund. He is responsible for the safeguarding of such
fund and shall be liable if certain irregularity happens.
12.
and

Petty cash fund must be separated from the change fund

the

collections

from

sales.

Such

fund

should

be

exclusively used for small immediate expenses.

13.

An imprest fund system is to be used for the Petty

Cash Fund.
WHEN TO CONSIDER AN EXPENSE UNDER PETTY CASH DISBURSEMENT
b. The expense should require an immediate cash
c. The expense must not exceed Php200.
69 | P a g e

d. Make sure that the expense is for the entitys use and
not for personal use of any member of the entity.
PROCEDURE IN REQUESTING PETTY CASH FUND
1. A pre-numbered Petty Cash Requisition Form must be filled
out by the requestor, and such form shall be forwarded to
the manager for approval. The Manager should consider the
conditions stated above in deciding whether to approve
the

request

or

not.

Unapproved

PRF

should

not

be

recognized by the Cashier.

2. The approved PCRF will be presented to the cashier and
the cashier shall issue a pre-numbered Petty Cash Voucher
with the amount indicated in the PCRF. Before finally
giving the fund, the cashier must ask for the signature
over printed name of the requestor in the petty cash fund
received form to document that the cash was given to the
requestor, after such he shall count the cash in front of
the requestor to assure that the amount is correct before
giving it to the latter.
3. After

the

should

disbursement

liquidate

his

is

made

expenses

by

the

through

requestor,
attaching

he
the

related OR or Invoice in the Petty Cash Voucher to be

returned to the cashier.
4. The cashier will then immediately record the liquidation
on the pre-numbered Petty Cash Register.
PROCEDURE IN REPLENISHING THE PETTY CASH FUND
1. Every after liquidation made by a requestor, the cashier as
the

petty

cash

disbursement
whether

the

made

custodian
through

petty

cash

should

check

petty

cash

fund

satisfies

the

fund

balance

and
the

of

determine
following

condition:
70 | P a g e

a. The petty cash disbursements reached 60% of the total

fixed fund which is (1,500*60%) Php 900.
b. Such

disbursements

composing

more

than

60%

of

total

amount should be liquidated.

2. If the conditions above were met, the cashier shall prepare
a

pre-numbered

replenishment
Petty

Cash

Invoices

CDV

and

indicating

forward

Register

attached

that

by

such
he

the

there
to

the

prepared

requestors

the

amount

manager
and
in

the
the

for

with

the

ORs

and

PCV

for

liquidation.
3. The manager will then check the consistency of the petty
cash register with the liquidating source documents showed
to him by the cashier. Dates and amounts should be properly
checked. Once verified that the PCR was fairly stated, he
will approve the CDV and issue a check to be given to the
cashier for withdrawal.
4. The cashier upon withdrawing the check from the bank should
put the money in the petty cash box ready for other petty
cash disbursements. He should also forward the approved CDV
to the bookkeeper for proper recording.
5. Again, only original copies should be recognized by the
cashier.

ACCOUNTS RECEIVABLE
Accounts
business.

receivable
Strong

are

amounts

internal

that

control

customers

must

be

owed

to

the

established

for

accounts receivable account to control the receivables of the

business, uncollectible amounts should be minimized.

71 | P a g e

1. All

transactions

involving

sales

on

account

shall

be

subject to the approval of the manager. This procedure will

enable the manager to check the credibility of the buyer to
pay its debts.
2. Once the manager approves, the cashier will then prepare 3
copies of the sales invoice. The sales invoice indicates
the name of the customer, the date, the contact number of
the customer and the down payment of the customer and the
total amount of the goods purchased.
a. Sales Invoice 1 will serve as the copy of the customer.
This shall be presented to the cashier upon payment.
b. Sales Invoice 2 will serve as the copy of the cashier.
This will be handy in case the customer doesnt have his
copy of sales invoice upon payment.
c. Sales Invoice 3 will serve as the copy of the manager as
a backup copy incase the copy of the customer and cashier
was lost.
3. Accounts Receivable Subsidiary Ledger must be maintained
for each customer. Each account must be updated every time
there is a payment made by the customer. Also the sales
invoices are also updated whenever there is payment. The
credit records of the customer shall be placed in a locked
drawer with two keys. One for the cashier and another for
the manager- this will serve as a duplicate key in case of
72 | P a g e

loss of the original key. The cashier will turn over the
key to the manager at the end of the day.
4. The customer shall pay at least 50% of the total amount of
the purchased goods. This is mandatory for the business in
order to lessen uncollectible accounts of the business.
5. In order to encourage early payment from the customers, the
credit terms would be 2/10, n/30. Discount of 2% shall be
given to customers who will pay within 10 days after the
date of purchase.
6. The cahier will contact the customer through phone calls if
after 30 days from the date of sale the customer hasnt
paid yet the amount. This control will be done to remind
the customer of his receivable to the business. If the
customer

is

hard

to

contact

through

phone

calls,

the

assistant manager shall go to the address of the customer

and all expenses incurred (e.g: transportation) shall be
added to the account of the customer.
7. The receivables should not exceed 60 days. The estimated
uncollectible

amount

for

every

sale

is

2%.

The

account

shall be treated as uncollectible account once the 60 day

period has lapsed and the assistant manager has already
exerted

all

efforts

to

collect

the

accounts

but

the

customer still cant pay.

73 | P a g e

8. The bookkeeper will make adjustments to provide for the

writing off of the allowance and the uncollectible accounts
as written in the accounting policy of the entity.

INVENTORY
Good inventory controls prevent losses and misstatements while
helping in managing inventory levels. Since inventory is quite
expensive,

any

measure

to

protect

this

investment

should

be

considered.
PROCEDURE IN REQUESTING PURCHASE OF INVENTORY
a. Based from the daily updated Inventory Report, if the
level of inventory reached 30% of its regular number of
what is being ordered thats the time when a request
should be made.
b. The Assistant Manager should conduct physical count upon
knowing the level of inventory based on record.
c. If after the physical count, the inventory on hand indeed
reached its minimum level, he will prepare the Purchase
Requisition Form, indicating there in the items which
need purchase and the quantity to purchase.
1. The prepared PRF shall be the basis of preparing Purchase
Order which shall only be prepared by the Manager if and
only

if

he

approves

the

PRF.

The

manager

should

not

directly prepare PO without the reference of PRF to avoid

mismanagement of inventory.
b. The

Manager

upon

receiving

the

PRF

together

with

the

Inventory Report from the Assistant Manager shall also

74 | P a g e

conduct physical count of inventory and assess whether

there is really a need to purchase or not considering
that purchasing will involve additional expenses and not
just the cost of inventory.
c. If after the physical count he found out that there is
really a need to purchase then thats the time when he
will approve the PRF and look for a supplier.
ii.

In looking for supplier, the manager should look for

options wherein he would look for several suppliers
offering the same inventory and conduct a canvass of
prices.

iii. In

selecting

which

among

the

supplier

shall

he

choose, he must consider the following:

1. Quality of the inventory
2. Price of the inventory
3. Discounts that the vendor can offer
4. The way of transmitting the inventory, whether
the freight cost will be paid by the entity or
the vendor.
d. After

the

Manager

selects

the

supplier,

he

will

then

prepare 3 copies of pre-numbered Purchase order in line

with the negotiation he made with the supplier.
i.

First PO will be sent to the supplier

ii.

Second copy will be kept by the Manager

iii. The

third

copy

indicating

the

should

be

quantity

a
of

blind
each

copy

PO

inventory

not
to

purchase. The purpose of not indicating the quantity

is to persuade the Assistant Manager to count each
item that he has to receive.

75 | P a g e

e. When the Assistant Manager is to receive the inventory,

he must receive it with reference to the PO that the
manager sent him.
v.

Since the quantity is not indicated in the blind

copy PO, he shall check the following:
1. The quantity of each item
2. The quality of the inventory
3. He shall also check its expiry date

vi.

He should also receive the suppliers invoice with

regard to the received inventory.

vii. After such he shall prepare the Inventory Receiving

Report and send it to the Manager for verification.
viii.

The

manager

will

check

the

consistency

of

the

prepared Inventory report with his copy of PO, also

the

amount

indicated

in

the

invoice

with

the

negotiation that they had indicated also in the PO.

ix.

The bookkeeper shall receive the original copy of

sales invoice and Inventory Receiving Report from
the

Manager.

Only

original

copies

should

be

the

basis of his recording.

x.

The Manager shall have the copy of Purchase journal

prepared by the bookkeeper, and shall check it with
his copy of invoices issued by the entity

SAFEGUARDING OF INVENTORY
1. The inventory custodian is the Assistant Manager. One of
the

duties

physical

of

the

inventory

assistant
count

of

manager
the

is

to

inventory

conduct
inside

a
the

76 | P a g e

warehouse to check whether the record supports the physical

count.
2. The store personnel can only enter the warehouse under the
supervision

of

the

assistant

manager

this

is

to

avoid

theft.
3. The warehouse is locked at all times. Only the manager and
the assistant manager have the key to the warehouse. If the
key is lost, the other key shall only be used to open the
warehouse. Upon the loss of the key, the locked will be
immediately replaced.
4. The assistant manager shall turn over the warehouse key to
the manager at the end of the day.
5. For

proper

monitoring

of

the

inventory

inside

the

warehouse, they will maintain a logbook that contains the

date, time, name of the inventory, description, and number
of

sacks

the

store

personnel

and

his

personnel

signature,

gets,
and

name

the

of

the

signature

store

of

the

assistant manager.
6. The

warehouse

monitor

the

shall
In

&

be
Out

equipped
of

the

with

CCTV

inventory

cameras
and

who

to
is

responsible for it to prevent the possibility of theft and

who will be made liable for the theft.

77 | P a g e

OFFICE SUPPLIES
1. These supplies shall be under the custody of the assistant
manager.

These

should

be

placed

on

the

table

of

the

Assistant Manager for him to monitor usage and consumption

of it. At the end of each operating day these supplies
shall be locked in a drawer or separate cabinet.
2. The

assistant

requesting

Manager

office

will

supplies

be
upon

the

one

noticing

responsible
that

it

is

for
no

longer enough. He will fill out a pre-numbered Purchase

requisition form indicating there the items to be purchased
and its quantity.
3. The Purchase Requisition Form shall be forwarded to the
manager for approval. Once approved, the assistant manager
will canvass for the prices of the items needed. After
such, he will prepare the pre-numbered PO and forward it
again to the manager for approval.
4. Upon approval the PO will be sent by the assistant manager
to the chosen supplier.
5. When delivery is to be received a receiving report must be
prepared by the assistant manager and he should also ask
for the suppliers invoice to process the payment for such.
6. The assistant manager should prepare the CDV for payment
and forward it to the manager with the receiving report for
approval.
7. Approval from the manager for the CDV will be asked and
when it is approved the manager would also issue a check
for such disbursement and give it to the assistant manager.
8. The

assistant

manager

will

present

the

invoice

and

the

check when paying. He shall ask the supplier to stamp his

copy of invoice as received.

78 | P a g e

9. The PRF, PO, CDV and SI will be forwarded to the bookkeeper

attached

with

one

another

for

proper

referencing

of

documents. Only original copies will be recognized by the

bookkeeper.

FIXED ASSET
Fixed

asset

produce
Internal

are

and

long

deliver

control

term
its

assets

products

regarding

fixed

owned
nd

by

the

manage

assets

business

its

should

to

operations.

be

strong

to

prevent assets misuse and theft.

Authorization
a. The

assistant

manager

shall

check

the

condition

of

the

fixed asset at the end of the month in case there is a need

to purchase a new one.
b. If

there

business,

is
the

need

to

assistant

purchase
manager

will

new

asset

prepare

for

the

Purchase

Requisition Form to be given to the manager for approval.

c. The manager is the only authorized person to approve the
Purchase Orders to acquire new fixed assets.
SEGREGATION OF DUTIES
1. Before

the

manager

approves

the

PRF,

the

manager

shall

thoroughly inspect the fixed asset whether it only needs

some repairing to restore it back to its good condition.

79 | P a g e

If the fixed asset needs only some repairing, then the

purchase requisition form shall not be approved and
will be marked cancelled.

However, if the cost to be incurred in repairing the

asset is more costly compared to purchasing a new one.
Then

the

manager

shall

approve

the

purchase

the

assistant

requisition form.
2. Once

the

manager

manager

will

quality

of

be
the

approved
the

one

fixed

the
to

asset

PRF

form,

canvass
to

for

be

the

price

purchased.

and
list

containing a variety of fixed assets from different stores

is to be reported to the manager. This list contains the
different brand names of the fixed asset available, its
description and its corresponding prices.
3. Upon deciding which fixed asset is to be purchased and upon
choosing the supplier that offers the fixed asset at lower
cost

without

sacrificing

its

quality,

the

manager

will

prepare 3 copies of purchase order.

a. PO1 will be given to the supplier. The PO contains the
name

of

the

description

of

asset
the

to

be

product

purchased,
and

the

date,

quantity

to

the
be

ordered.

80 | P a g e

b. PO2 will serve as the copy of the manager. This will

be

used

as

the

basis

for

payment

along

with

the

Official receipt provided by the supplier.

c. PO3 will serve as the copy of the assistant manager.
He will use his copy for verification purposes.
4. The assistant manager is the one assigned to receive the
asset along with the suppliers invoice. He should check
the quality of the asset delivered, whether the description
of

the

asset

delivered

corresponds

to

the

description

stated in the PO and he is also responsible for its check

test.
5. After

checking,

he

will

prepare

Fixed

Asset

Receiving

Report and give it to the manager for review purposes.

6. The manager will check the accuracy of the Fixed Asset
Receiving Report with his copy of PO, also he will check if
the amount in the invoice tallies with the amount stated in
the PO.
7. After

the

Fixed

Asset

Receiving

Report

has

been

double

checked by the manager, the assistant manager will prepare

the CDV and attached the suppliers invoice then forward it
to

the

manager

for

approval.

Once

the

CDV

has

been

approved, the manager will then issue a pre-numbered check

and will give it to the supplier. The manager is the only

81 | P a g e

person authorized to make payment to the suppliers to make

sure that there are no unauthorized payment will made.
8. Upon payment, the manager should mark the invoice as PAID
and indicate there the date on which it was paid.
9. The bookkeeper shall receive the approved CDV together with
the attached invoice that is marked PAID, and the Fixed
Asset receiving Report from the manager. All documents he
received shall be the basis of his recording.
10. After recording all the transactions, the bookkeeper shall
give it back to the manager and the manager shall keep it a
secured cabinet for safety purposes.
SAFEGUARDING OF FIXED ASSET
1. All fixed assets are to be kept inside the store.
2. The

access

to

the

door

keys

is

only

restricted

to

the

manager. The manager is person responsible in the opening

and

closing

of

the

business.

In

case

the

manager

is

unavailable due to some reasons, the assistant manager can

be authorized to open the business.
3. The weighing scales used in the business shall be secured
in

one

location

inside

the

store.

The

safety

of

the

weighing scale must be ensured so that the possibility that

it

might

fall

or

any

damages

that

might

occur

will

be

eliminated.

82 | P a g e

4. As for the carts, a tag will be placed in each to secure

that it will be easily distinguished from other carts. The
tag will be a name tag that shows the name of the business,
which is E.A Reyes Poultry and Agricultural Supply.
5. Every time the carts are used, the store personnel should
return them to where they are originally placed.
6. As the store closes, the carts will be put back inside the
store.
DOCUMENTATION
1. The manager maintains a list of all of the assets used in
operation of the business, such as weighing scales, carts,
delivery vehicles, furniture and fixtures.
2. The list shall include the following information:
a. Description of each assets
b. Cost if each asset at the time of acquisition
c. The date the asset was acquired
d. The number of its estimated useful life
e. Salvage value
3. The record if the fixed assets should be updated annually
since it depreciates yearly.

83 | P a g e

LIABILITY
ACCOUNTS PAYABLE
1. All

transactions

subject

to

the

involving
approval

purchase
of

the

on

account

manager

and

shall

be

should

be

properly monitored by him.

a. Monitoring the payables is important in determining
when a certain debt would be due and when should the
payment be made.
b. Since a copy of sales journal is given to him, he
should indicate when a certain debt is due for him
to be reminded of the necessary payment to be done
in a separate calendar.
c. When there are discounts offered with a given term,
such

term

is

preferred

as

to

the

date

when

the

entity should pay the debt.

d. Upon noticing that a certain payable is due he shall
ask the Assistant Manager to prepare a CDV regarding
the on due payable.
e. He will then check the prepared CDV first before
approving it and issue a pre numbered check.
f. Only the Manager is also allowed to give the check
to the supplier or creditor.

84 | P a g e

REVENUE
1. Revenue is upon the purchase of the goods irrespective
whether there is cash received or the sale is on account.
2. When there is cash received, the internal control for
cash receipt is followed.
3. Official

receipts

should

be

pre-numbered

sequentially.

The cashier is responsible in recording both the Cash

Sales

and

Sales

on

account.

All

receipt

or

invoices

should be intact and must be checked at the end of the

day.
4. The receipts should tally with the Cash received and with
the Daily Cash Collection Report. If there is a missing
receipt, it should be investigated.
5. The

manager

is

responsible

for

keeping

all

the

pre-

numbered receipts in a lock drawer. There will be 2 keys.

The original copy would be for the cashier and another
copy of the key will be kept by the manager. This shall
be used if the copy of the key of the cashier is lost.
Hence, the key will be replaced.
6. The

bookkeeper

is

the

one

to

record

the

revenue

transactions. He should keep all the records and support

documents to ensure verifiability of transactions.

85 | P a g e

EXPENSES
UTILITIES EXPENSE
The amount the business incurred in using electricity, water,
and telephone bills.
1. The assistant manager will be the one to receive all the
utility bills from CASURECO for the month. Upon receiving
the billing statement, he shall prepare Check Disbursement
Voucher

(CDV)

and

will

forward

it

to

the

manager

for

voucher,

the

approval.
2. Before

approval

of

the

check

disbursement

manager will check the accuracy of the amounts stated in

the bill and the CDV.
3. Once the CDV has been approved by the manager, he shall
issue a pre-numbered check and encash it to the UCPB bank
and pay the utilities expense to CASURECO before the due
date comes.
4. In case of unavailability of the manager, the assistant
manager
Official

can

pay

Receipt

for

the

shall

be

utilities
presented

provided
to

the

that

the

manager

for

verification purposes that the utilities were paid.

86 | P a g e

5.

The billing statement, CDV, and the Official Receipt shall

be placed in an envelope and shall be forwarded to the

bookkeeper

for

recording

purposes

and

journalizing

the

transactions.

SALARIES EXPENSE
The amount incurred by the business to pay their employees to
compensate the services they provided to the business.
1. The assistant manager is the one responsible in preparing
and

computing

contributions

the
such

payroll
as

SSS

of

each

contribution

employee.
and

All

PHILHEALTH

contribution must already be deducted from the payroll.

2. The prepared payroll is subject to the approval of the
manager.

The

manager

shall

check

the

accuracy

of

the

computed payroll to the Daily Time Record of the employee.

3. The assistant manager will be the one to prepare the check
disbursement

and

he

will

be

the

one

responsible

for

in

distributing

the

encashing the check to UCPB bank.

4. The

manager

salaries

of

is
the

the

one

responsible

employee,

which

shall

be

placed

in

separate envelope for each employee. Upon distribution of

the salaries, the employee will be asked to fill out and

87 | P a g e

sign the payroll as a proof that the employee received his

salary.
5. The

bookkeeper

is

responsible

in

journalizing

all

transactions regarding salaries expense and responsible in

adjusting the salaries expense for the period
6. All supporting documents such as Daily Time Record, Payroll
Register, and Check disbursement voucher must be kept in an
envelope inside a locked drawer for safekeeping.
DEPRECIATION EXPENSE
1. The depreciation expense is computed by using the straight
line method of depreciation.
2. The bookkeeper will be the one to compute the amount of the
expense

and

he

will

be

the

one

to

journalize

the

transaction in the books of the business.

3. The manager shall verify all the transactions posted in the
books by doing some inspections randomly to make sure that
the amount being depreciated is being adjusted correctly.

SSS CONTRIBUTION EXPENSE

1. The manager is the one responsible in ensuring that all
requirements required by SSS are compiled accordingly.
2. The assistant manager, who is responsible in making the
payroll register, must deduct the appropriate share of each
88 | P a g e

employee in SSS contribution and subject to the review of

the manager.
3. The

manager

should

coordinate

with

the

bookkeeper

in

submitting the necessary documents to SSS.

4. The manager shall keep the necessary documents needed in
filing for SSS in a locked cabinet in his office.

PHILHEALTH CONTRIBUTION EXPENSE

1. The manager is the one responsible in ensuring that all
requirements

required

by

PHILHEALTH

are

compiled

accordingly.
2. The assistant manager, who is responsible in making the
payroll register, must deduct the appropriate share of each
employee

in

PHILHEALTH

contribution

and

subject

to

the

review of the manager.

3. The

manager

should

coordinate

with

the

bookkeeper

in

submitting the necessary documents to PHILHEALTH.

4. The manager shall keep the necessary documents needed in
filing for PHILHEALTH in a locked cabinet in his office.

89 | P a g e