ASSESSMENT OF INTERNAL CONTROL

OVER CASH
(THE CASE OF WEGAGEN BANK,
WOLKITE BRANCH)

A Research Paper Submitted to Wolkite University, College of

Business and Economics, Department of Accounting, in Partial
Fulfillment of the Requirements for BA Degree in Accounting

Prepared By: Markos Chorfo

Advisor: Instructor

NOVEMBER 2010 E.C.

WOLKITE, ETHIOPIA
ABSTRACT
This research paper seeks to address the cash management practice of Wegagen Bank Wolkite
branch. It was addressed five basic research questions designed to asses cash management
performance of the bank. For the purpose of the study both primary and secondary data were
used, but much focus on primary data in which more information was obtained by interview and
questionnaires.

After the data has been gathered, it was analysed and presented. The data analysis was carried
out based on tabulation and percentage method. Careful interpretation of analysed information
would be carried out to arrive at reasonable generalization.

Ultimately the research would be expected to provide rescannable results that could help the
management to take rescannable decision for their future activity.
ACKNOWLEDGEMENT
First of all I would like to extend my special thanks to my Advisor ………….. for this generous
and unreserved assistance to carry out the research paper. Finally I would like to thank for all my
friends for supporting me complete this paper.

TABLE OF CONTENTS
ABSTRACT....................................................................................................................................................1
ACKNOWLEDGEMENT.................................................................................................................................2
LIST OF TABLES............................................................................................................................................5
ACRONYMS..................................................................................................................................................6
CHAPTER ONE..............................................................................................................................................7
INTRODUCTION...........................................................................................................................................7
1.1. Background of the Study..............................................................................................................7
1.2. Background of the Organization..................................................................................................8
1.3 Statement of the Problem...............................................................................................................8
1.4. Objective of Study..........................................................................................................................10
1.4.1. General Objectives..................................................................................................................10
1.4.2. Specific Objectives..................................................................................................................10
1.5. Significance of the Study.................................................................................................................10
1.6. Scope of the Study..........................................................................................................................10
1.7. Limitation of the Study...................................................................................................................10
CHAPTER TWO...........................................................................................................................................11
LITERATURE REVIEW..................................................................................................................................11
2.1. Cash Management..........................................................................................................................11
2.2. Controls over Cash..........................................................................................................................12
2.3. Cash Planning (budgeting)..............................................................................................................13
2.4. Cash Controlling..............................................................................................................................14
2.5. Reasons of holding cash..................................................................................................................16
2.6. Investments of surplus (idle) cash..................................................................................................16
2.7. Managing cash receipt and payment..............................................................................................16
2.8. Basis internal control principles for cash payments......................................................................17
CHAPTER THREE........................................................................................................................................18
RESEARCH METHODOLOGY AND DESIGN..................................................................................................18
3.1. Area of the Study............................................................................................................................18
3.2. The Research Design.......................................................................................................................18
3.3. Data Type and Source.....................................................................................................................18
3.4. Method of Data Collection..............................................................................................................18
3.5. Sample Size and Sampling Technique.............................................................................................18
3.6. Data Analysis and Presentation......................................................................................................18
CHAPTER FOUR..........................................................................................................................................19
DAT ANALYSIS, INTERPRETATION AND PRESENTATION............................................................................19
4.1. Cash management practice............................................................................................................21
 4.2. Investment of Idle cash...................................................................................................................21
4.3. Managing cash receipts and payments...........................................................................................23
CHAPTER FIVE............................................................................................................................................27
CONCLUSION AND RECOMMENDATION...................................................................................................27
5.1. CONCLUSION..................................................................................................................................27
5.2. RECOMMENDATION.......................................................................................................................28
REFERENCES..............................................................................................................................................29
Appendix...................................................................................................................................................30

LIST OF TABLES
Table 4.1 Educational back ground of respondents

Table 4.2 Respondents department in the bank

Table 4.3 Service years of respondents in department that they working

Table 4.4 Analysis of cash management practice

Table 4.5. Idle cash

Table 4.6 Response regarding to investment of idle cash

Table 4.7 Response Regarding the rate of cash position in bank

Table 4.8 Response regarding cash receipt and payment.

Table 4.9 Response regarding cash budget

Table 4.10. The source of short term finance

ACRONYMS
WB = Wegagen Bank
CHAPTER ONE

INTRODUCTION
1.1. Background of the Study
Cash is a medium of exchange that the bank will accept for deposit and immediate credit to
depositor account that include currency and coins, personal checks, bank drafts, money order
credit cards, select drafts and so on (Planket, 1986).

Cash management is one part of the financial management system. It is a proper use of an
entities cash resource, since the bank play a major role in facilitating the way of financial sector
operates with banks utilize. Cash is important for understanding not only banking behaviour but
also for the role that the bank play in the transmission mechanism by effective cash management
banks can reduce cash balance at the minimum level and at the same time customers requirement
can be insured banks are business established that safeguard can be insured banks are business
established that safeguard peoples’ money and use it to loan and investment, cash management
services as the mean to keep the bank functioning by making the best use of cash or liquid
resources of the bank. Therefore banks are very much interested in establishing procedure for
increasing the efficiency of their management. Among the procedure carefully prepared cash
forces (short-term and long term) and investment of idle cash is the major ones. (www.
docstoc.com).

Wegagen Bank gives various type of service to their customers for example the mobilization of
financial resources and lending the resources to the business community mobilization of
financial resource arise from the fact that the amount of productive investment is very low. In
order to receive financial constraints on investment financial intermediaries are expected to play
a deceive role is bringing about efficient way of rising the required level of funds through
application of proper financial management system. Therefor financial managers how cash the
bank should carry, the specific types of securities to issue and how much of the firms earning to
Retain versus to pay dividends, (www.banketh.com)

1.2. Background of the Organization

Wegagen Bank is a share Company; it is established in June 11, 1997. It is registered as a public
share holding company in accordance with licensing and supervision of banking business
proclamation No. 84/1994 and the commercial code of Ethiopia. It started with 60 million paid
up capital and 30 – million subscribed capital. When it is established, the number of shareholders
was 16. After nine years of operation, Wegagen raised the paid up capital to 111 million and
number of share to 116,091.

Wegagen’s mission is to attract potential customers, create and sustain market leadership by
establishing networking of high performing work units, and also to generate high amount of
profit.

Wegagen is committed for achieving its objectives by following core business principles the
bank stated at establishment, with loyal and committed staff members. These principles are
outstanding customer service, business integrity, prudent lending policy, and strict control
discipline.
Up to the year 2009/10 the bank has 55 branches of which 27 are located in Addis Ababa and 28
are in different regional towns of the country. The study area of the research is in Wolkite
branch. It has networked the head office, city branches and outlining branches.

The Major Services of Wegagen are:-

 Accept different types of deposits

 Grant variety of loans

 Offer full – fledged international banking service.

 Renders local and international money transfer services.

1.3 Statement of the Problem

Management is responsible for controlling and protecting of the business like inventory,
receivables, plant assets and cash. Cash management is one part of financial management system
that focus on internal control and forecasting the future cash requirement.
(www.Investopedia.com).

Cash is the most important element of banks day today activity. By effective cash management
banks can reduce the excess cash at optimum level and ensure customers’ requirements. Cash
management involves neither excess not deficient amounts of cash on hand at right time proper
cash management requires that the bank know how much cash is need as well as how much it has
and where that cash is at all time. Cash management also require knowing the amounts of fund
available for investment and the length of time that can be must. (Planket, 1986).

Banks are increasing becoming innovative and anticipating the needs of corporate towards
standardization, enterprise resources planning integration, reconciliation, real time reporting,
providing an end view as cash management value chain besides offering the ability to reach and
be reached their own customers the mounting pressure from competition forces the banks to look
an information technology vendor who offer better solution and services in cash management
(www.hightech.com).

Even though cash management receive a priority for financial institution, little is known on how
effectively monitor its cash flow, how to accelerate collection receipt and optimize timing of
disbursement, maximizing interest relate collection receipt and optimize timing of disbursement,
maximizing interest earning and properly secured investment.
Therefor this study tried to investigate a solution for the following basic research questions.

 What are the source of short term financing used by WB?

 How the bank control cash receipt and disbursement.
 Does the bank have idle cash?
 Does the bank has cash budget?
 Does the bank possess cash shortage?

1.4. Objective of Study

1.4.1. General Objectives
The general objective of the study focus on assessment of control over cash of Wegagen Bank in
Wolkite Branch.

1.4.2. Specific Objectives

 To identify the source of short term finance in the bank.
 To assess the internal control of cash receipts and disbursement.
 To assess the bank’s its cash budget.
 To identify and asses idle cash its investment area.
 To compare theoretical aspect of cash management practice with in actual practice of WB.

1.5. Significance of the Study

This study will benefit WB of Wolkite Branch by identifying factors that affect the internal
control over cash and suggesting possible recommendation. It also reflects cash management
practice of Wolkite Branch with its limitation and weakness and give possible commented idea
or solution as to how the financial manager of WB of Wolkite Branch should control its cash
under the proper management of cash.

1.6. Scope of the Study

Here the researcher knows that the study includes the whole banks cash management practice but
time and financial constraints the researcher forced to focus on the assessment of cash
management practice of WB of Wolkite Branch. After this study the community would expected
to compare the cash management practice of WB with theoretical aspect of cash management
and it there is cash management problem give possible solution (Advices).
1.7. Limitation of the Study
During the collection of data for this study purpose the researcher would face different
limitation, like voluntariness of the concerned people to give the information and there was also
a time constraint to do this study.

CHAPTER TWO

LITERATURE REVIEW
2.1. Cash Management
Definition of cash: - cash is a medium of exchange that a bank will accept that a bank will accept
for deposit and immediate credit to the depositor account. Cash is any medium of exchange that
a bank will accept of face value which include bank deposits, currency, coins, bank draft and
money order.

Definition of management: - is a process of setting organizing and achieving of a given

management basic functions which as planning, organizing, controlling and directing that utilize
human, financial and material resources. Management is a process by which under taken by one
or more persons to achieve the stated goals (Planket, 1986).

Definition of Cash management! - Strategy by which a company administer and invest its idle
cash. Cash management is concerned with the managing of cash balance held by the bank for
liquidity purpose and investing idle cash. Cash management is managing the cash properly to
maintain the profitability of cash excess and to minimize the cash shortage risk. Cash
management is generally centred on forecasting and internal control. Cash management is
importance for any business enterprise because cash a means of acquiring goods and services.
The management of a cash is necessary since cash constitute the smallest portion of asset but it
needs considerable time devotion for managing due to is nature of easily misappropriates in
order to solve uncertainty about cash inflow and out flow and also lack of balance between cash
receipt and disbursement, the firm should develop appropriate strategies for cash management.
Some of the cash management strategies are the following:-

Cash planning: - Cash inflow and out flow should be planning to protect cash surplus or deficit
for each period of the planning period. Cash beget should be prepared for this purpose.

Management the cash flow: - the flow cash should be properly managed the cash out flow should
be decelerated and in flow relatively increase.

Optimum cash level: - The firm should be decide about the appropriate level of cash balances.
The excess cash and cash deficit should be matched to determine the optimum level of cash
balances.

Investing surplus Cash:-The surplus cash balances should be properly invested to earn profits.
The firm (bank) should decide about the division of cash balance between alternative short term
investments such as bank deposits market securities. The idle cash management should be
depend on the firm product, competition etc.

Cash is the most liquid asset and the standard medium of exchange and the basic for measuring
and accounting for all other items. Cash is important current asset for operation of a business. It
is the basic impute needed to keep the business running on continuous basic. It also the ultimate
output expected to be realized after a services is delivered. To be reportable as such it must be
readily available for the payments of current obligation and it must be free from any contractual
restrictions that limits its use in satisfying debts. In accounting cash consists of coin, currency
and available found on deposit and the bank negotiable instruments such as money order,
certified cheque personal and bank draft are also viewed as cash. Saving account usually
classified as cash although the bank has the lead light notice is rarely demanded by banks saving
account are considered as cash (Keiso etal, 2001)

2.2. Controls over Cash

Due to it’s easily transferability, cash is the asset most likely to be used by employees and
manages. Cash is also vulnerable to theft since many transactions either directly or indirectly
affects the receipt or payment of cash. The objective of internal control over cash are to be
provide accurate information about cash. To avoid cash shortage and excess (idles) cash and
protect cash from theft and misuse. To control cash receipt the firm, should record the cash
receipt properly and immediately deposit the cash receipt amount.

2.3. Cash Planning (budgeting)

Cash planning is a technique to plan and control the use of cash. It protects the firm by
developing a projected cash management from forces of exacted cash inflows and outflows for a
given period. Cash beget is a planning tool that helps the management of the business in making
important decision. It is a schedule of expected cash payment and cash receipts. It results the
effect on the cash position at a given level of operations. The forecast may be based on the
present operation or the anticipated future operations. Cash planning in very import in
developing overall operating plant of the firm. The cash planning (budgeting) may be done on
monthly quarterly or yearly basis. The period and frequency of cash planning generally depend
on the size of the firm and philosophy of management, cash budget is a set of formal (written)
statement of management’s expectation regarding sales expenses production volume and various
financial transactions of the firm for the coming period. Cash budget consider as a standard at
the end of the period and serve as a control devices to help management measure the firm
performance may be improved. Cash budget helps to identify periods of cash surpluses. It also
help the financial manager to measure the amount and duration of cash shortage and to prepare
repayments schedule and it there is. Cash budget helps to prepare prepayments schedule and it
there is cash shortage to finance with borrowed funds (college Accounting, P.230)

Advantages of Cash budgeting

Cash budget estimates the occurrence, amount and duration of cost and payment schedule for
any needed financing.

Is important tools for planning and controlling because forecasted error can be traced to the
individual components of the cash budget?

Important for forecast of occurrence amount and duration of cash level overhand above the
minimum desired end of month cash balances.

Serves as an integrative analytical tool for cooperation of the individual components of that
produce cash budget inflows and out flows are brought together and their overall impact on cash
flow can be estimated (Navel, e 1985)
2.4. Cash Controlling
Proper internal control of cash mechanisms provide management with reasonable assurance that
intended safeguard are being practiced consistently. Due to it’s easily exposed to theft and
misuse special control should be need for any organization. For the effective of cash control in
an organization the following cash control method can be used as cash control principle and
standards.

2.4.1 Segregation of Duties

Represent for each work different employees in order to create for each employees
responsibilities and assures that one person is not made bias. For this purpose the following
function should be segregated in order to maintain a proper segregation of duties.

Record Keeping Functions

Creating and maintain department records such as processing and posting transactions and cash
register recording for select transactions manually and preparing cash receipt backups (Craig
1988).

Authorization Function

Reviewing and approving of transaction example approving invoice, refunds and other
correcting entries, approving cash transfers and movement of assets should be authorized by the
management the organization or the responsible person.

Reconciliation Function

Assurance that transactions are properly taken place. It is present at a supervisory level or by
accounting office. Example comparing funds collected to the account receivable posting
comparing collections to deposits and comparing departmental records of revenue to the general
ledgers.

2.4.2 Accountability

Proper accountability is present when an asset (cash) and all cash handling activities and
accounted for properly documented and traceable to specific cash handle. The following
functions should be performed in order to maintain a proper accountability structure.

Individual Accountability
Proper delegation of authority and responsibility means that knowing who has access to an asset
and why they access. It represent when transaction are identified to a person, individual cash
drawers areas signed to each handless and separate password are severed.

Cash accountability

Proper securing means knowing where asset can at all presents when all funds remain properly
secured. Receipt are given to each and every customer and keys and ward are secured.

Process accountability

Proper documentation means knowing what was accrued from beginning of a process to end of a
process it is resent then all transfers are well document and receipt are properly prepared and
secured (Craig, 1988)

Security monitory

Means that the safety of and transport of assets are taken in its consideration and follow up
proper protocols and procedures. It’s present when two people are involved in handling cash,
asses one properly and transported.

Transaction recording

Transaction are correct and the appropriate back up is maintained. It is present when daily
receipts are reconciled to the cash register totals and the receipts collected.

Authorization and approval: - means that the proper supervisor and managing review and
approve transaction. It is present when receipt issued are reconciled and when receipt issued are
reconciled and when surrey cash counts are performed are performed on at least annual basis or
turn over exists.

2.5. Reasons of holding cash

Banks maintain on inventory of currency to satisfy its objectives. Primarily to meet the daily
currency demands of deposition, either at teller windows or author mated teller machine. It the
bank know with certainly the daily flow currency from deposits and with drawers, the amount of
cash required could be determine clearly. If there were on costs associated with shipments
currency backs should reduce their holding of cash and increase the frequency of currency
shipments. Secondly, regularly agency mandate legal reserve requirements that can be meet only
by holding qualifying cash asset. Thirdly, bonks serve as a clearing house for nations checks
payment system, each banks must hold sufficient balance at financial institutions so that check
written by its depositors will clear when presented for payments. Finally. Banks use cash
balances as to purchase service from correspondent bank (Timothy etal. 1995)

2.6. Investments of surplus (idle) cash

Investment is the alterative in order to manage properly the idle or surplus cash. Banks are one
financial institutions which hold surplus of cash for short of time and wish to earn at least some
return on temporally idle cash. The primary function of a bank are to act as a depository for its
customers. Funds to meet the credit needs for its services area. The excess amount of cash hold
by firm to meet its variable cash requirements and future contingencies should be temporarily
sales in a national bank up sources of liquidity to meet these uncertainty flows.

Investing idle cash has two primary function. First it is a major source of getting earning and the
other function Is to provide for the banks liquidity need that is expected or unexpected a cash
needs. Investment of temporarily idle cash in selected type of marketable securities is a key
element of good financial management. The following are example short term money market
instrument like treasury bills commercial paper, certificate of deposit bank deposit (rose Stephen,
1995)

2.7. Managing cash receipt and payment

Cash receipt and payment management if to assure that all cash receipt and payment of the
company properly managed for the purpose of the company.

2.7.1 Internal control over cash receipt

To assure that all cash receipt by a business organization should be recorded without any
misappropriation. The system control over cash receipt takes place in two ways. The firs one is
cash control over the counter and cash control by mails from charges.

Internal control of cash receipt over the counter Cash register should be used to cash receipt and
the amount written on the cash register should be visible to customers. There should be pre
numbered receipt used in sales process. The cash receipt should be deposited immediately. A
person independent of the cashier should count cash and compare it to the amount recorded on
the receipt. Internal control of cash receipt by mail .The mails should be locked and the key
should be placed on the hand of responsible person. At least two people should have to present
when mail is opened and list of money received should kept.
A prelisting of cash received should made in three copies, one copy for cashier, the second for
account department the third copy kept by preparer.
2.7.2 Internal control over cash payment

Cash disbursements are particularly exposed to frond and embezzlement. To avoid this cash
should be paid only after the precept of specific authorization by documents that establish the
validity amount of the client. Besides to these duties in the purchase of goods and services and
payments for them should be separated.

2.8. Basis internal control principles for cash payments

All payment should be made by check, the check should be authorized and approved by
independent individual preparation before payments are essential.

Voucher system: - a system of internal control for cash payment that provides documentary
evidences and authorization for each obligation incurred. Voucher is a special form on which
relevant data about a liability to be paid and the details of its payments is recorded. It has the
following functions.

 It is consists of procedures for systematically gathering recording and paying

expenditures.
 It provides strong control by separating duties and responsibilities for authorization of
expenditure receipt of goods and services, validation of liability by examination of
invoices from correctness of prices, shipping cash and credit terms, payments of
expenditure etc. (arenas and lobbecke, 2002)

CHAPTER THREE

RESEARCH METHODOLOGY AND DESIGN

3.1. Area of the Study
The study conducted on the cash management practice of Wegagen Bank Wolkite branch,
3.2. The Research Design
For this study descriptive design type of research, was going to be used. Because, the aim of the
study was to describe the actual cash management practice of Wegagen Bank Wolkite branch.

3.3. Data Type and Source

For this study, the researcher was used both quantitative and qualitative data type especially the
later one. The researcher also use both primary and secondary source of data.

3.4. Method of Data Collection

For primary method of data collection observation and unstructured interview would been used
rather than other method of data collection because in order to understand the real cash
management practice need to observe the activities. The secondary data was collected by
reviewing the company published and unpublished journals, magazines and reports.

3.5. Sample Size and Sampling Technique

From a total population of employees of WB 8 employees were selected as Sample size by using
judgmental sampling techniques-Because these 8 employees were especially engaged in the area
of cash management practice.

3.6. Data Analysis and Presentation

After necessary data were collected from the primary source and secondary sources the data
would processing and analyse data processing is an activity which involves interpretation data to
make the data appropriate for analysis. Data analysis would be done both by using qualitative
and quantitative data processing from the data get the data presenting would be descriptive data
presentation by using tables and others.

CHAPTER FOUR

DAT ANALYSIS, INTERPRETATION AND PRESENTATION

The analysis and interpretation of this paper is based on primary data by using non–probability
sampling technique which is judgmental sampling based on their experience. The questionnaire
was distributed for 8 employees. 6 questionnaires was returned and the response rate 75%. The
bank’s manager was also selected to evaluate the cash management practice of Wegagen Bank,
Wolkite branch. However secondary data are also used as a base for evaluation.

Table 4.1 Educational back ground of respondents

 No Educational status No of respondents Percentage%

1 Diploma 1 16.7%

2 Degree 5 83.3%

3 Other 0 -

4 total 6 100%

Source: - Researchers own computation of primary data

As it is shown in the Above the respondent educational back ground is leveled in to three
categories 0%, diploma 16.7% and degree holder 83.3% most of the respondents are degree
holders while one of the them are diploma are holder.

From the above table the researcher understand that in Wegagen Bank, Wolkite branch there is
educated employees. Therefore the bank can serve its customer on time because of educated
employees give their service to the customers when they need. This implies that the customers
are initiated to deposit their cash in this branch. As a result the bank get efficient amount of cash
to serve its customer.

Table 4.2 Respondents department in the bank

No Department No of Respondents Percentage %

1 Cashier 3 50 %

2 Accountant 2 33.3%

3 Manager 1 16.7%

4 Total 6 100%

Source: - Questionnaire

In the table above 50% of the respondents are from cashier, 33.3% of the respondents are from
the accountant, 16.7% from the manager. From the percentage shared by looking the number of
respondents the researcher decided that, there is segregation of duties in the Wegagen Bank
Wolkite branch by segregating duties, that is, by avoiding putting of employees in position of
excessive trust and responsibility. Avoiding giving of one person control over all stage of
process the bank manage cash effectively.

Table 4.3 Service years of respondents in department that they working

 No Service year No of Respondents Percentage %

1 1 -2 year 1 16.7%

2 2 -6 year 2 33.3%

3 Above 6 year 3 50 %

4 Total 6 100%

Source: - Researchers own computation of primary data

As it shown in the table the years of the respondents is categorized in three categories that is 1-2
years, 2-6 years, above 6 years. Most of the respondents (50%) have above years gave service in
the bank. This implies, they are familiar with Jobs and they have been experienced, this have a
great advantage for the control of effective cash management.

4.1. Cash management practice

Cash management involves having the optimum (that means neither excess nor deficit amount of
cash on hand at the right-time). In order to manage the cash of the company properly, the bank
knows how much cash is needed in the operation. To manage the cash appropriately the
Wegagen Bank generally and Wolkite branch particularly set primary goal. These include to
provide the cash need to meet the firm’s payment and to minimize the amount of idle cash held
by the bank.

Table 4.4 Analysis of cash management practice

Does the bank perform theoretical response Number of Percentage%

aspect in to actual cash management? employee

Yes 6 100%

No -

total 6 100%

Source: - Questionnaire

According to the response of the respondents all of them said the bank perform theoretical forms in
to actual management.

In this case the advantage of this to know the bank have effective cash management procedure and
maintaining sufficient cash amount in operational activities.
 4.2. Investment of Idle cash
Businesses cannot service without cash to pay bills and to finance growth. On the other hand
having too much cash is insufficient because cash earns considerably less than firms cost of
capital.

Table 4.5. Idle cash

Does the bank possess idle cash? Response Number of Percentage%

employee

Yes 4 66.7%

No 2 33.3%

Total 6 100%

Source Questionnaire

From the above table 4(66.7%) of respondents said that yes and 2( 33.3%) said no . this shows
the bank has excess amount of cash on hand that is not needed for immediate purpose rather it
needed in the future period hence, the researcher understand that the bank has a problem of cash
management.

Table 4.6 Response regarding to investment of idle cash

What criteria the bank Response Number of percentage%

consider to invest its idle employee
cash? Maturity 0 0%

Liquidity 2 33.3%

Profitability 4 66.6%

Total 6 100

Source Questionnaire

The table 4.6 clearly shows that 66.6% of respondents select profitability as the criteria that the
bank consider to invest its idle cash and 16.7% of each respondents select liquidity as criteria.
From these the researcher understand that, profitability play a major role in the investment of idle
cash because it measure the income level or the operating success of the bank for company
ability to develop. And also, liquidity is the next criteria of the bank in order to invest idle cash
because it is frequently used as the ultimate test of managements operating effectiveness.

Table 4.7 Response Regarding the rate of cash position in bank

In the operation of the bank Response No of Percentage%

How do you rate the cash employee
position? Mostly Excessive 5 83.3%

Optimum 1 16.3%

Relatively Deficient 0 0%

Mostly Deficient -

Total 6 100%

Source Questionnaire

From table 4.7 the researcher clearly know that 83.3% of respondents that the rate of the bank
cash position was mostly excessive and 16.7% says that the rate of cash position was optimum.
From this the researcher conclude that there is mostly excessive cash position in Wegagen Bank
Wolkite branch. This indicates that there is idle cash that not used for immediate purpose.

4.3. Managing cash receipts and payments

Just as cash the beginning of operating cycle. It is often starting point for company’s system of
internal control. Cash is the mere assets that are ready convertible in to any other type of asset.

4.3.1 Internal control of cash receipt

In order to protect cash from the theft on misuse a business control cash receipts similar to
different types of business. As the manager said the bank control cash receipts in different
procedures, the bank prepare record of all cash receipts as soon as cash is received, because most
theft of cash occurs before record is made. The bank designated cashier are authorized to handle
cash receipts different individual receive cash record cash, receipts and deposit and hold the
cash.

4.3.2 Control over cash payments

Cash is paid for several reasons, such as to pay expense and liabilities or the purchase asset. The
paying teller is only responsibility for making payment and required to check that the signature
and the cheque are verified. That the amount bear signature verified machine operator and
internal auditors report when every a paying teller requests for additional cash. The morning cash
cheques and vouchers are journalized and be compared with the total submitted by paying teller
cash on hand at the end of the payment from the blotter must agree with the total amount of cash
withdrawn from the chief casher.

The chief cushier checks the correctness and balancing of the cash by verifying the cash pocket
and counting the lose notes.

Table 4.8 Response regarding cash receipt and payment.

Did the bank manage its cash Response No employee Percentage%

Payment and cash receipts
properly? Yes 6 100%

N0 - -

Total 6 100%

Source Questionnaire

As it is observed from the above table, the response of the respondents shows that 100% of
respondents said yes. According to the above table the bank arrange it cash receipts and
payments properly. Adequate system of internal control provides protection of cash balance and
procedure for the management of cash payments to accomplish these objectives each day’s
receipts and all cash payment made by cheque.

From these the researcher understand that the bank have its cash management system and apply
giving quality service to practical.

Table 4.9 Response regarding cash budget

How is the cash budget Response No of employee percentage

Compared with actual? Very good 6 100%

Good - -

Moderately - -

Not satisfy - -
 Total 100%

Source Questionnaire

As can see from the above table all respondents gave their idea on preparation of cash budget.
Hence the researcher conclude that the Wegagen Bank, Wolkite branch appropriately prepared
cash budget. Wegagen Bank, Wolkite branch used cash budget as one of the financial principal
method of forecasting the finance needs of venture and forecasts the combined effects of planned
operation on the company’s cash flow. The cash budget thus indicates the amount of funds. That
will be needed or available for operation of bank.

Table 4.10. The source of short term finance

What are the source of short Response No of employee Percentage

term finance for the bank?

Customer’ deposit 4 66.6%

Capital reserve 1 16.7%

Other 1 16.7%

Total 6 100%

Source: - Questionnaire

From the above table the respondents response shown that 66.6% are customer’s deposit, 16.7%
is capital reserve and 16.7% is other.

The researcher conclude that the bank have many customers that use deposit service. This
indicates there is high cash flow. As a result the bank gain amount of profit by lending the
money to other customers or by investing in government treasury bills.
CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1. CONCLUSION
The main objective of the study is to assess the cash management practice in Wegagen Bank,
Wolkite branch. Based on the analysis and findings of the previous chapter the following has
been concluded.

 Many of the employees in Wegagen Bank, Wolkite branch has service years above six years.
This implies they are well familiar with jobs they have been assign.
 Internal control of cash receipt and disbursement in the bank applies in a good way which in
the theoretical aspect of cash management.
 Adequate system of internal control provides protection of cash balance and procedure for
the management of cash payment to accomplish this objective each day’s receipts and alias
payment made by cheque.
 The bank have relatively enough (sufficient) short term financing for its normal operation
which come from different source like customer deposit and capital reserve.
 Investment of idle cash which is one base principle of cash management, Wegagen Bank,
Wolkite branch have better investment trend of idle cash in short term market investment by
considering its liquidity and profitability.
 The bank used cash budget as one of the financial principal method of forecasting the finance
needs of venture and forecasts the combined effects of planned operation on the company’s
cash flow.

5.2. RECOMMENDATION
From the discussion held in chapter four the researcher suggests the following points for
better achievement of its objective of cash management practice.

 The bank should give necessary training for their employee for further success of the
bank and to save time and cost.
 The bank should manage it cash more than the current method for the success of bank
and satisfaction of customers.
 When the progress of the time, organizations update their previous cash management
system, so Wegagen Bank, Wolkite branch use effective and efficient updated
technology for the improvement of its cash management is Advisable by the
researcher.
 Even though source of short finance for the bank relatively sufficient for its normal
operation try to find other sources of financing its short term finance rather restricted
on the existing source finance.
 The management of cash receipt and disbursement of the bank trend and appreciable
way which is acceptable in the universal policies, the bank shall continue by this
trend in the future operation period.
  The bank should use the excess cash for investment purpose in order to generate
target profit (interest) rather than putting the money on hand incurred cost for excess
cash.
 Finally, the researcher suggest that because of cash is liquid and it is important to
manage it. Therefore the collection disbursement, and failure to collect note
receivable should be given special attention for cash management because cash is the
blood of an organization, it is unthinkable to operate any activity without cash.

REFERENCES
 Arenas. Lobeck. 2001. Auditing integral Approach 9th. Edition.
 Bringham.F, 1995. Fundamental of financial Managing 7th edition.
 Dav`s, Dukes, Dychkam. 1995. Intermediate Accounting 3rd edition
 Kieso. Weygadite, war filed.2001. Principle of Auditing 9th edition.
 Kockw, Timothy, Mach-Donald.1995. Bank management 4th edition
 Planket. 1986. Fundamentals of managerial finance 2nd edition.
 Raymond, P. Nevell 1985 fundaments of managerial finance 7th edition.
 Rose Stephen. 1995. Fundamental management and corporate finance 4th edition.
Appendix
WOLKITE UNIVERSITY
COLLEGE OF BUSINESS & ECONOMICS
DEAR RESPONDENT

The purpose of this questionnaire was to collect data for requirement for partial fulfillment of
B.A degree in accounting in Wolkite University. Your genuine response for the following
question is extremely important for the successful completion of this paper the information
provide used for purpose indicated and will be kept highly confident I would like to thank you in
advance for your cooperation and scarification of your time.

Part one: - General Information

 Education Status
Diploma  degree  other specify  experience 
 Salary 1000-1500  1500-2000  above 2000 
 Service 1-2  2-6 above 6 years 

Part 2 questions
1. What are the source of short term finance for the bank?
Customer’s deposits  other (specified) 
Capital reserve 
2. When the bank paying the payment?
 On the due date  be for due date 
After the due date 
3. Does the bank possess idle cash? If yes where dose the bank invest idle cash------------
4. What criteria the bank consider to invest its idle cash?
Maturity  profitability
Liquidity  other 
5. Does the bank has cash budget
Yes  no 
6. If yes in what terms?
Monthly  semi annually 
Quarterly  annually 
7. Does the Bank perform theoretical aspect in to actual cash management?
Practice? Yes  No 
8. In the operation of the bank how do you rate the cash position?
Mostly excessive relatively deficit 
Optimum  mostly deficit 

9. How do you rate the survive quality at the bank

Yes  No 
10. Did the bank manage its cash a payment and cash receipt properly?
Yes  No 
11. What are your responsibility in the bank?
Accountant  secretary  other 
Casher  manager 
12. How is the cash budget compared with actual?
Good  very good moderately  No satisfy 
13. What method does the bank use to control cash receipted disbursement