The Petty Cash Book

Aims of the Session The petty cash book Controls on petty cash

Petty Cash Book Used for low value purchased such as: Stationery Small office supplies Casual wages Window cleaning Travel expenses Postages Usually has a maximum value, for example £25 for an item.

The Petty Cash Book The Petty Cashier receives a float. Is responsible for the security of it. Makes payments against vouchers. Records and analyses the vouchers in the Petty Cash Book. Balances the cash regularly. Tops it up when required. Passes the completed book to the bookkeeper for entry into the ledgers.

The Imprest System The petty cashier starts the period with a set amount of money. As payments are made the level reduces. At the end of the period the money is topped up. Start the week with imprest amount £100.00 Total of petty cash payments during the week £80.00 Cash held at the end of the week £20.00 Amount drawn from bank to restore the imprest amount Cash at the start of the next week

Petty Cash Vouchers Contain: Date, details, amount of expenditure. Signature of person making the claim. Signature of person authorising the payment. A serial number. Have supporting documentation. Petty Cash Voucher Number 47 Date Description Amount Photocopier paper VAT at 20% Total 3 20 64 84 Signed: Mrs Tiddlywinks Authorised: Ms Puddleduck

Layout of the Petty Cash Book Date Details Amount Postages Stationery Travel Ledger Money In Money Out

Murdstones Tutor led exercise The week begins with a petty cash float of £100. 9 Apr the cashier reclaims £52, this is the difference between what has been spent £62, what has come in £10 and tops the petty cash back up to £100. Receipts and payments are totalled to £162. The balance brought down will be £100.

Transfer the Analysis Columns The totals are then transferred to the general accounts. The petty cash book can be part of the double entry system or go through a control account. Part of the double entry system straight transfer of information. Not part of the double entry system goes through the petty cash control account.

Restoring the Cash Float The petty cash book would be reimbursed, depending on the business’ procedures. The double entry is: Credit: Cash book/Bank (reducing an asset) Debit: Petty cash (increasing an asset) The reimbursement is what has been spent, to top up the petty cash to required amount. Cash Requisition Voucher Number 007 Date: 09 Apr X5 Details Petty cash reimbursement Total 52 00 Signed: Mrs Goldfinger Authorised: Mr J Bond

Checking the Cash The petty cash needs to be regularly checked. At any one time the imprest amount minus the value of the vouchers should equal the cash in hand. A company has an imprest amount of £100, which is restored at the beginning of the month. The following payments were made in April: 6 Apr Stationery £12.50 10 Apr Taxi fare £10.00 14 Apr Postage stamps £4.55 20 Apr Window cleaning £12.00 25 Apr Donation to charity

Checking the Petty Cash 6 Apr Stationery £12.50 10 Apr Taxi fare £10.00 14 Apr Postage stamps £4.55 20 Apr Window cleaning £12.00 25 Apr Donation to charity On 30 Apr the petty cash comprised of: 1 x £10 note, 7 x £5 notes, 5 x £1 coins, 1 x 50p coin, 1 x 20p coin, 1 x 10p coin, 2 x 5p coins, 1 x 2p coin, 3 x 1p coins. Total payments were £49.05. The remaining cash should be £100 – 49.05 = £50.95

Checking the Petty Cash Number Held Value £10 1 £10.00 £5 7 £35.00 £1 5 £5.00 50p £0.50 20p £0.20 10p £0.10 5p 2 2p £0.02 1p 3 £0.03 TOTALS £50.95 On 30 Apr the petty cash comprised of: 1 x £10 note, 7 x £5 notes, 5 x £1 coins, 1 x 50p coin, 1 x 20p coin, 1 x 10p coin, 2 x 5p coins, 1 x 2p coin, 3 x 1p coins. Total payments were £49.05. The remaining cash should be £100 – 49.05 = £50.95

Petty Cash Control Hand over – take overs Consistency Security of cash and vouchers Correct payments Accuracy when writing up the petty cash book Surprise checks need to be carried out by management Segregation of duties between Petty Cash Cashier and bookkeeper. Petty cash should always balance. Petty cash should be frequently checked by account supervisor. Discrepancies need to be dealt with promptly. HOTO – balances need to be reconciled, any discrepancies should be reported to management Same amount of money every month/week Needs to be kept in a locked cash box and control kept of the keys, might want to keep it in a locked draw too. Vouchers need to be kept for at least 6 years in a secure place to avoid fraud/tampering with Check for: person receiving has signed voucher; voucher is signed by authorising person; supporting evidence is attached; amount is within petty cash limits. Must be accurate when being written up Why? To ensure that nothing untoward is going on. Payments and receipts and cash should add up to balance. Discrepancies may include: petty cash claims not authorised; insufficient supporting evidence; amounts exceeding the petty cash limit; supporting paperwork and voucher differ; difference between totals of expenses columns and totals of the petty cash columns; difference between petty cash box and balance in book. What to do? If you can’t resolve it yourself (simple maths mistakes, missed a voucher) refer to supervisor

Recap The cash book is a book of prime entry and part of the double entry system. Records cash and bank payments/receipts. The analysed cash book shows more detail. Petty cash book for small payments. Uses the imprest system.

Questions?

Look Forward To: Trial balances Capital versus revenue expenditure