chapter 11 - maintaining petty cash records
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CHAPTER 11
Maintaining petty cash records
Contents
1 The purpose of petty cash2 Security and control of petty cash3 The imprest system4 Petty cash vouchers5 The petty cash book6 Recording and analysing petty cash
transactions7 Recording petty cash transactions: sales tax8 Topping up the float, balancing off and
posting petty cash
Chapter scenario
The purpose of petty cash
Payments for small items of expense
Exam focus point: A possible MCQ might be 'Which one of the following items would/would not be paid out of petty cash?'
Question
Would you say that the items, amount and recipient below are acceptable for petty cash payments at Top Toys
Expense item Amount Direct recipient Acceptable?
Portable air conditioning unit $75.99 S.Gray, off. manager
Coffee filters for office coffee machine $2.99 Asif Sultan, PA
Bunch of flowers for Valentine's day $18.00 Nick King, Sales
Bus ticket to Plastics Today conference $2.60 Nick King, Sales
Security and control of petty cash The petty cash box Limiting the size of petty cash payments Authorisation and authorisation limits Receipts
Sales tax receipts No available receipts
The imprest system
Petty cash vouchers
Prepared by cashier when payment is requested
Usually, vouchers are numbered in sequence for each year, starting at 1 with the first voucher each year
For what?
Example
On Monday 14 December 20X7 you receive the following requests for reimbursement. The last voucher used the previous week was numbered 100.(a) The receptionist, Mrs T Scott, produces a receipt for postage stamps purchased for office use to the value of $6.25.(b) The sales manager produces a receipt for $7.50 in respect of a return rail ticket, purchased in order to visit a customer.
Task:Using the blank petty cash vouchers provided, complete
vouchers for the above two items. Ignore sales tax.
Answer
Petty cash payments for expenses not yet incurred
ExampleSuppose that a director of company C needs
money to pay for a taxi and asks for $20.00 from petty cash on 5 July 20X7. The payment might be sanctioned by the accounts supervisor, T Roberts. The next day, the director returns with a taxi cab receipt for $15.50 and gives back change of $4.50.
Solution
Payment in advance Voucher received
Checks on petty cash and vouchers
What might be the reason?(a)A mistake in the amount of cash paid out, eg
the petty cashier might have paid out $10.00 for a voucher of only $9.80, leaving a 20c shortage of cash
(b) Theft from the petty cash box
IOUs and petty cash
When staff borrows cash, he or she must put an IOU into the petty cash box
IOUs are equivalent to cash
Receiving money into petty cash An employee of the organisation might use some of the
office's postage stamps, to put on personal letters. He or she will pay for the stamps by giving the cash to the petty cashier
Similarly, employees might be expected to pay for any private telephone calls that they make from an office telephone
Very occasionally, perhaps when the petty cash float is running low, the money received from a cash sale might be used to boost petty cash.
Question
On Tuesday 15 December 20X7, you receive the following requests for reimbursement.
(a) The new office clerk presents bus tickets for amounts totalling $3.60 to support a request for payment for his first week's travel to work.
(b) Ten new printer cartridges have been received costing $5.50 each. An invoice has been sent with the goods and a receipt will be issued on payment.
(c) The office caretaker asks for $5 to pay as a gratuity to the refuse collectors, as has been customary in previous years.
(d) A clerk says that the administration manager asked him to purchase coffee, tea and sugar for the office kitchen. The receipt shows a total cost of $15.40.
Answer
I am not able to complete vouchers for any of the items in this exercise.
(a) I would refuse reimbursement. The cost of an employee's daily travel to work is not an expense of the business.
(b) This request exceeds the $25.00 limit applying to petty cash disbursements. I would refuse the request: the bill will be paid from the main bank account.
(c) No receipt will be available and the request should therefore be referred to the Administration Manager.
(d) The sum exceeds my $10.00 authorisation limit and should be referred to the Administration Manager.
Petty cash book
Example: Writing up petty cash book payments
There are four analysis columns in the petty cash book.• Travel• Postage• Stationery• Sundry items
Answer
Example
Here are two receipts for payments that include a tax element. A claim from petty cash is made separately for each. How would these be recorded as petty cash vouchers and how would they be recorded in the petty cash book?
Answer
Voucher
Answer
Petty cash book
Topping up the float, balancing off and posting petty cash
Answer
Answer
1. Cast and cross-cast columns in petty cash book2. Count cash and vouchers in petty cash box3. Calculate amount of, and prepare, cheque requisition and cheque4. Specifying notes and coins required, cash cheque at bank and put cash in box, enter in petty cash book5. Balance off petty cash book6. Check balancing off7. Post totals to general ledger
Quiz
1 Why do organisations need petty cash?2 Who is responsible for the safety and security of the petty cash
box?3 What is the nature and purpose of the imprest system?4 (a) What details are shown on petty cash vouchers?
(b) What information is usually only added to petty cash vouchers when the petty cash book is about to be written up?(c) What should be attached to a petty cash voucher?
5 What items are recorded on the left-hand side of the petty cash book? And what on the right?
6 Why might money be received into petty cash?7 On what grounds could you ignore the sales tax element of petty
cash vouchers?8 State the 7 steps for topping up, balancing off and posting petty
cash.
Answer
1 Because small items of expense need to be paid for out of notes and coins.
2 The petty cashier, a 'deputy' in his or her absence.3 The imprest system is designed to keep control of petty cash. The
imprest amount is the maximum amount in the petty cash box4 (a) Purpose of payment, amount paid, name and signature of
recipient, name and signature of person authorising payment, date of payment.(b) Voucher number(c) Receipt
5 Receipts (debit side). Payments (credit side).6 Payments from employees for personal use of company property,
cash sales7 If it were company policy to do so.
QB 19
An organisation restores its petty cash balance to $500 at the end of each month. During January, the total column in the petty cash book was recorded as being $420, and hence the imprest was restored by the amount. The analysis columns, which had been posted to the nominal ledger, totalled only $400. This error would result in
A No imbalance in the trial balanceB The trial balance being $20 higher on the debit sideC The trial balance being $20 higher on the credit sideD The petty cash balance being $20 lower than it should
be
Answer: C
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