Meaning of Internal Check
internal check refers to allocation of duties to the employees in an
organisation in such a way that the work of one person is automatically and
independently checked by the other person from the beginning to the end. It
denotes such an arrangement of duties among the staff that the work performed
by one individual is independently checked by another in the routine course,
such that errors and frauds are prevented or discovered. Under the system of
internal check, care is taken to ensure that no one person handles a
transaction completely from beginning to end and the work of every person is in
the ordinary course checked by another person.
Firstly, the Cheque is produced at the counter where the clerk
issues a token and enters the token number on the back side of the cheque and
in the token book.
Secondly, the cheque is then passed on to the ledger clerk who
verifies the credit balance in the account of customers and makes the debit
entry therein for the amount of the cheque.
Thirdly, the cheque is sent to an officer, who compares the
signature on the cheque with the specimen signature of the account holder and
passes it for payment.
Lastly, the cheque is then sent to the cashier who makes the
payment against the token and records it in the cash register.
Thus, withdrawal of cash from a bank account is undertaken by
four different persons such that work of one person is checked by other person
in order to avoid the occurrence of errors and frauds. The system of internal
check is exercised in such a way that no individual person does the entire work
and the process is in the following manner.
Sales Department makes an entry in the Sales Register for name of the customer,
date of sale, quantity and amount of sale and issues a Sales Invoice.
The store keeper in Stores Department makes an entry for material issued in the
at the factory gate the gate keeper makes an entry when the goods are sent out
in Accounts Department the person records the sale transaction based on sales
the cashier on receipt of cash makes an entry in Cash Book and issues receipt
acknowledging cash received.
the transaction is passed through five different persons from different
departments, and hence the work of one person is automatically checked by the
other person in order to avoid errors and frauds.