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Important notes 1
Process petty cash transactions
Petty cash claims and vouchers are checked for approval, accuracy and authenticity prior to processing
Petty cash is a small fund of money, often not exceeding $100, kept in the office for small purchases of items such as postage stamps, tea, coffee and milk, small quantities of special envelopes, pens or paper, taxi fares etc. The officer responsible for petty cash is known as the petty cashier or petty cash officer.
The imprest system of keeping the petty cash involves deciding on the maximum amount of money to have available and regularly reimbursing the fund to the original amount (imprest amount or float). Your organisation may decide $100 will be enough to cover petty cash expenditure for at least a month. A cheque is written out and cashed (the imprest cheque) and the money placed in the petty cash tin. Each time money is spent the transaction is written up in the petty cash book (manually or using computer software). The petty cashier will keep track of the total amount spent and when the amount left reaches a minimum amount a reimbursement cheque will be written. If, for example, $85 has been spent during the month there will be $15 left in the petty cash tin. The reimbursement cheque will be made out for $85, cashed, and the amount in the tin replenished (topped up) to the original imprest amount of $100.
In the imprest system, the total of cash on hand in the petty cash tin, and the receipts or other proof of expenditure documents, will always equal the petty cash imprest amount.
Security should be maintained at all times
- Petty cash should be kept in a locked box/ money tin in a (preferably fireproof) locked safe, cupboard or drawer, out of public view
- Only the petty cashier and authorised supervisor have authority to access petty cash; money should never be lent from the fund
- Access keys should be managed carefully so that there is no unauthorised access to the fund and the key is kept separately from the cash box
- The amount and location of the petty cash fund should not be discussed
- Reimbursement should be collected from the bank at varied and undisclosed times
‘Accountability’ is being accountable (or held responsible) for one’s actions. The petty cashier must follow organisational policies and procedures to ensure that the petty cash fund is maintained correctly.
The petty cash officer must
- check all petty cash claims for accuracy and authenticity before releasing funds and ensure items purchased are business related and authorised
- accept claims only from authorised personnel – people authorised to purchase on behalf of the organisation
- reimburse approved petty cash claims quickly and accurately
- record all petty cash transactions in the petty cash book at the time the transaction is completed
- reconcile the petty cash float and arrange reimbursement of the float as often as necessary
- refer any unresolved discrepancy in the reconciliation immediately to an authorised person
- file all ‘Paid’ and recorded petty cash vouchers in a secure place until reimbursement of the fund is arranged – attach the paid vouchers to the reimbursement claim
- maintain the security of the petty cash at all times
All staff are responsible for
- requesting and retaining dockets and/or receipts when paying for goods and services
- checking at point of purchase that receipts are clear and complete (date, item/s purchased)
- claiming reimbursement within a specified period of time
- knowing the organisation’s policy regarding what expenditure can be paid for from petty cash
Petty cash transactions are processed and recorded within designated time limits
Petty cash transactions may be recorded using a number of methods – paper based, electronic, organisational accounting system – and it is usual for the organisation to have a designated timeframe within which claims must be made and processed eg 48 hours. GST and discount received should be recorded on the petty cash voucher and in the petty cash book.
Irregularities are noted and referred to nominated person for resolution
From time to time claims may be made from petty cash that
do not meet the organisation’s policy and procedures.
The expense might be above the limit to be paid from petty
cash or be for an unusual item. These irregularities should
be referred to a supervisor or the accounts department when
the decision appears to be beyond the authority of the petty
cash officer.
Transactions are checked and petty cash book balanced according to organisational requirements
At all times the amount in the petty cash tin, and the total amount spent (as documented by receipts and petty cash vouchers) will equal the imprest amount. All cash should be accounted for at all times.
Designated timelines will be set for the petty cash period and the fund will be balanced at the end of this period (usually monthly). Australian Accounting and Auditing standards and legal and organisational policy, guidelines and requirements will control the recording procedures and audit mechanisms used.
Processing the petty cash
Establish the petty cash fund
Management will decide on the amount to be held in the petty cash fund, a cheque will be prepared and cashed and the amount entered into the petty cash book.
Complete a petty cash voucher for reimbursement of expenditure
- Check the accuracy and authenticity of the receipt received; does the expenditure comply with organisational policy and procedures? Is the receipt dated and does it specify what was purchased?
- Prepare a petty cash voucher and attach the receipt to the voucher.
- Pay the money owed to the staff member and have them sign for it.
- Place the voucher and receipt into the petty cash tin.
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The following information is included on a petty cash voucher.
- Voucher number – vouchers are consecutively numbered
- Date – of the reimbursement
- Details/Particulars – what was purchased
- Charge/Debit – the dissection into which the transaction will be recorded eg postage, stationery, sundries
- Amount ($) – the amount paid
- GST amount included in the purchase cost – find this on the receipt
- Signature – the person incurring the expense and being reimbursed
- Approved – the petty cashier’s signature
Record the transaction in the petty cash book
Enter the transaction into the petty cash book or spreadsheet
The petty cash book is the record of amounts received and
paid out. Notice that the voucher (above) is the first one
entered. The petty cash record may be hand written or kept
electronically using a spreadsheet program. Note that
- entries are recorded in chronological (date) order
- details are the same as ‘particulars’ on the voucher ie what was purchased
- the total amount of the claim is recorded in the total column
- the amount of the claim is recorded in the appropriate dissection column (can be more than one if the purchase was for several items)
- GST is recorded in the GST column
- the amounts recorded on each line in dissection columns (omitting GST) will equal the total column
When using a manual petty cash system special care must be taken when the bottom of the page is reached. All columns must be totalled and the totals recorded on the last line of the page. These figures are then written on the first line of the next page.
Total and Balance the petty cash book
The fund must be balanced regularly and reimbursed when the cash on hand reaches around one-third (or just under half) of the imprest amount.
The example above identifies each of the steps required to balance the petty cash book.
- Rule a line under the last entry made
- Add each of the figures in the total column and record on the next line (this will be the amount of the reimbursement cheque). Add up each dissection column and record these on the same line in the appropriate column. These figures will be required when completing the reimbursement cheque.
- Count the cash on hand left in the petty cash tin. Record the amount directly under the total (this should be the difference between the original imprest amount and what has been spent). Write ‘Cash on hand’ in the Details column and rule a line under the amount entered.
- Add the total amount spent (reimbursement amount) and the cash on hand. Record this figure in the total column. This figure must equal the imprest amount.
- Add up any entries in the Amount Received column. Record the total in the amount received column on the same line as the balance in the Total column.
- Rule a double (total) line under these last two entries. At this point the reimbursement cheque would be completed.
This ‘balances’ the fund ie both columns of figures agree or balance.
To start a new petty cash period
- write the cash on hand figure in the amount received column and notate it ‘Cash on hand’
- write the reimbursement cheque in the amount received column and notate it ‘Reimbursement cheque’
- continue with entries as required.
The reimbursement cheque
Note
- the date of the reimbursement appears on the cheque and the butt
- the cheque is drawn to ‘cash’
- payment is for ‘petty cash reimbursement’
- the name and amount spent from each dissection is also written on the butt. This information comes from the petty cash book (the total of each dissection column) and indicates what the petty cash has been spent on. If there is insufficient space on the butt, this information can be recorded on the reverse of the butt.
- the amount in words and figures must agree
- the cheque must be signed by authorised signatories
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