Journal Question ► Why do companies have rules and processes to follow when dealing with cash?

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Presentation transcript:

Journal Question ► Why do companies have rules and processes to follow when dealing with cash?

Petty Cash

What is petty cash? ► Most businesses, have to pay for some expenditure in cash. It is usually more convenient to pay suppliers by using electronic cash transfer or by check. However, for whatever reason, sometimes this is just not practical and suppliers will need to be paid in cash.

Petty Cash ► The majority of businesses generally restrict cash payments to small items of expenditure and minor employee reimbursement. As a result, a small amount of cash is usually kept in a secure cash box and is known as the petty cash float.

Petty Cash Box

How to manage petty cash How to manage petty cash ► Internal Control 1 – Buy a proper cash box with a lock and keys. ► Keys to the cash box should be given to a couple of trusted members of staff. These members of staff should be given the specific responsibility of managing and controlling petty cash.

► Internal Control 2 – Keep the cash box in a secure location. ► Cash boxes should be kept out of site if not in use. Ideally, they should be kept in a secure location such as a locked cupboard or draw.

► Internal Control 3 – Use petty cash vouchers to record payments ► Next you need to buy a pad of petty cash vouchers. These small pads can also be purchased relatively cheaply from most good office stationery suppliers. Put one or two pads in the petty cash box, with a pen ready for the first payments.

► Each time a payment is made from the petty cash box, the following needs to be recorded on the petty cash voucher: ► Date of the payment. ► Details of exactly what the payment was for. ► The amount paid out. ► The signature of the member of staff who was given the cash. ► The signature of a responsible member of staff such as a manager to approve each payment. ► A reference number (ideally you should give the vouchers sequential reference numbers). ► To minimise the risk of fraud, petty cash vouchers should not be completed in pencil

► Internal Control 4 – Keep all receipts and invoices ► Once a payment has been made it is essential to keep the supporting receipt or invoice. The best thing to do is to staple them to the completed authorized petty cash voucher. Keep completed petty cash vouchers, together with the supporting receipt or invoice in the petty cash box. ► Not only does this reduce the risk of fraud, but tax authorities require businesses to keep these documents to prove that expenditure incurred is for business purposes.

Activity ► Complete the Petty Cash log sheet using the information found on the back of the sheet ► Choose one item and fill out a Petty Cash Voucher