Topic: Tools in Managing

Cash, Receivables and

Inventories
 Objectives:
At the end of the lesson, the learners should be
able to:
a. Identify cash, receivables and Inventory
b. Explain the tools in managing cash, receivable
and inventory.
c. Appreciate the importance of internal control in
a business.
WHAT IS
WORKING
CAPITAL?
WORKING CAPITAL
 Refers to the current assets used in
the operations of the business.
> Cash
> Accounts Receivable
> Inventories
> Prepaid expenses
 MANAGING OF
WORKING CAPITAL
ACCOUNTS
Managing of Working Capital Accounts

Cash
> The most liquid asset of
a company but it also
the asset most
vulnerable to theft.
Cash Internal Control

1. Separating Cashiering
function from the
recording or accounting
function.
Cash Internal Control

2. Issuing Official
Receipts for Collection
and summarizing
Collections in a Daily
Collection Report
Cash Internal Control

3. Depositing collections

4. Adopting the check

voucher system for
payments.
Internal Control of
Accounts Receivable

> Providing credit terms

to customer is one way
of generating Sales
Internal Control of Accounts
Receivable

1. Credit Evaluation/Screening
2. Credit Committee
3. Management of Accounts
receivable/ Monitoring of
AR collections.
Internal Control of Accounts
Receivable
Five (5) Cs for credit evaluation
1. Character
2. Capacity
3. Capital
4. Collateral
5. Condition
Managing Inventories

>Managing inventories is very

important for merchandising
companies and manufacturing
companies.

More even important with

companies which deal with highly
perishable products.
Managing Inventories

>Important for companies which are

dealing with products prone to
technological obsolescence such as
those involved in electronic products
and computer microchips.
Internal Control to safeguard
Inventories

1. Separating custodial
functions from the recording
functions.
2. Aging of Inventories
3. ABC Analysis
Identify the following if it is a Cash Management tool, Accounts Receivable
management tool or Inventories Management tool.

1. Separating cashiering function from the recording or

accounting function.
2. Character
3. Capacity
4. Issuing official receipts for collections and
summarizing collections in a daily collection report.
5. Separating Custodian functions from the recording
functions.
6. Depositing collections
Identify the following if it is a Cash Management tools, Accounts Receivable
management tools or Inventories Management tools.

7. Aging of inventories
8. ABC Analysis
9. Capital
10. Collateral
11. Adopting the check voucher system
for payments.
12. Condition
  Assumptions: The ABM company has the following
policies.
1. Cash collections shall be deposited every other day
regardless of the amount.
2. Cash advance is not allowed for official use only.
3. Any payments made to supplier shall be in the form of
check issuance regardless of the amount.
4. Customers applying for Purchase Order on credit shall be
required to submit legal documents of their company.
5. Policy for the inventory shall be First In-First Out.
6. Custodian function is separate from recording functions.
  Direction: Answer the following:

1. Give the three examples of working capital and

explain. ( 5 points)
2. Discuss what are the tools used in managing the
cash, receivables and inventories?
(15 points)
3. Why working capital management is very important
in a business? ( 5 points)

  Direction: Answer the following:

3. Why working capital management

is very important in a business?
( 15 points)

Thank You for your
participation.

God bless us all.