Control procedures used for cash transactions can include the use of bank accounts such as a general checking account, imprest bank accounts and lockbox accounts. In a petty cash system , a petty cash custodian is given a small amount of currency. The custodian obtains a signed receipt for the payment when a disbursement is made. When cash in the fund runs low, signed receipts are submitted to the general cashier who prepares a check to replenish the petty cash fund. This process is designed to promote control over small cash disbursements.
Enterprises can have an agreement with a bank concerning credit and borrowing arrangements.
The bank usually requires the enterprise to maintain a minimum cash balance on deposit also known as a compensating balance . Compensating balances that result in legally restricted deposits must be separately classified in the balance sheet. The nature of the borrowing arrangement determines whether the compensating balance is classified as a current asset or a noncurrent asset. If a check is written for more than the amount in the cash account, a bank overdraft occurs. These overdrafts should be accounted for as accounts payable or, if material, separately disclosed.