test of controls for cash receipts

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Bpp study text bank and cash system and there cash payment and cash receipt showen separately. Test of controls for Cash receipt Occurrence part

I don't think you need to know this for AA as this presumes specific knowledge of cheques - which even in the UK are becoming increasingly obsolete. So UK students might have known what this was 25 years ago - but not now. For your enlightenment - you need to know that a cheque is a negotiable instrument. So if I wrote a cheque to John Smith for £250 (20 years ago) - John Smith would have had to "endorse it" - i.e. sign it on the back in order to deposit it with the bank. Alternatively, if John Smith owed someone £250 - he could have endorsed the cheque over to a third party "pay [payee]" then sign it. So as a control, when a company received cheques - they would have been endorsed immediately with something like " “For Deposit Only” - this is called a restrictive endorsement. This means that the cheque cannot be further negotiated or exchanged for cash with the paying bank. However, the need for restrictive endorsement is made obsolete by the "special crossing" of the cheque. There are two types of crossing: "General crossing – Writing ‘Not Negotiable’ within two parallel lines across the face of the cheque means that the cheque must be deposited into a bank account and cannot be cashed. However, this crossing does not prohibit the cheque from being endorsed to another payee. Special crossing – Any cheque that is crossed and contains the words ‘Not transferable’, ‘A/C payee only’ or ‘Account payee only’ means that the cheque must be paid into an account in the name of the payee and cannot be endorsed or cashed." (Source: www.asb.co.nz/help/what-is-a-crossing-on-a-cheque.html) Since all cheques these days are preprinted with two parallel lines and the words "Account payee only" across them - there is no need for restrictive endorsement.