PETTY CASH PETTY CASH FUND FUND

MANAGEMENTMANAGEMENT

PETTY CASH FUND MANAGEMENTPETTY CASH FUND MANAGEMENT

I. Definition of Cash I. Definition of Cash • Cash is the standard medium of Cash is the standard medium of

exchange and the basis for measuring exchange and the basis for measuring

and accounting for all other itemsand accounting for all other items• It is generally classified as current It is generally classified as current

assetsassets• Cash consists of coin, currency, an Cash consists of coin, currency, an

available funds on deposit at bank available funds on deposit at bank

and other financial institutions.and other financial institutions.• Cash must be immediately available Cash must be immediately available

for the payment of current obligation for the payment of current obligation

and must be free from any contractual and must be free from any contractual

restriction. It is available for restriction. It is available for

unrestricted withdrawal.unrestricted withdrawal.

 

II. Classification of CashII. Classification of Cash

A. A. Cash in Bank Cash in Bank • It is included saving accounts, It is included saving accounts,

R/CR/C

B. B. Cash on HandCash on Hand• It is available in the company for It is available in the company for

paying daily operational paying daily operational expenses. expenses.

• Cash on hand is prepared to Cash on hand is prepared to pay for small payment called pay for small payment called petty cashpetty cash

III.III. How is Petty Cash Transaction How is Petty Cash Transaction Controlled andControlled and Reported?Reported?

As control measures of petty cash fund, the As control measures of petty cash fund, the procedures are widely used:procedures are widely used:

One person is usually given the responsibility of One person is usually given the responsibility of operating the petty cash fundoperating the petty cash fund

Each time an expenditure is made, a source Each time an expenditure is made, a source document (called a petty cash voucher) is document (called a petty cash voucher) is prepared for payment evidence. The voucher is prepared for payment evidence. The voucher is signed by the person receiving the cash and by signed by the person receiving the cash and by the person in charge of the fund (petty cashier). the person in charge of the fund (petty cashier). The petty cash voucher includes the amount The petty cash voucher includes the amount and purpose of the expenditure.and purpose of the expenditure.

A record (usually multi columned) is kept to A record (usually multi columned) is kept to record each expenditure from the petty cash record each expenditure from the petty cash fundfund

Each time the fund is almost depleted and also Each time the fund is almost depleted and also at the end of every accounting period, a check at the end of every accounting period, a check is prepared for the amount spent and cashed to is prepared for the amount spent and cashed to replenish the petty cash fund.replenish the petty cash fund.

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PETTY CASH RECEIPTPETTY CASH RECEIPT

No.No. 121121 Date Date August 1, 2001August 1, 2001

Paid to Paid to Metropolitan Times Metropolitan Times AmountAmount ForFor Daily NewspaperDaily Newspaper

Charge to Charge to Miscellaneous Administrative ExpenseMiscellaneous Administrative Expense

Payment received:Payment received:

S.O. HallS.O. Hall Approve byApprove by N.E.RN.E.R

IV. The Methods of Petty Cash FundIV. The Methods of Petty Cash Fund The Imprest SystemThe Imprest System The Fluctuating SystemThe Fluctuating System

The Imprest SystemThe Imprest System

A.A. A simple method in obtaining reasonable control while A simple method in obtaining reasonable control while

adhering to the rule of disbursement by checkadhering to the rule of disbursement by check

B.B. The imprest system works as followed:The imprest system works as followed:

• Someone is designed petty cash custodian and given a Someone is designed petty cash custodian and given a

small amount of currency from which to make small small amount of currency from which to make small

payments. The transfer of funds to petty cash is payments. The transfer of funds to petty cash is

recorded.recorded.• As disbursements are made the petty cash custodian As disbursements are made the petty cash custodian

obtains signed receipts from each individual to whom obtains signed receipts from each individual to whom

cash is paid. If possible, evidence of the disbursement cash is paid. If possible, evidence of the disbursement

should be attached to the petty cash receipt.should be attached to the petty cash receipt.

Petty cash transaction is not recorded until the fund Petty cash transaction is not recorded until the fund is reimbursed and then such entries are recorded by is reimbursed and then such entries are recorded by other person besides the petty cash custodianother person besides the petty cash custodian

When the supply of cash runs low, the custodian When the supply of cash runs low, the custodian presents a request to the general cashier for presents a request to the general cashier for reimbursement supported by the petty cash reimbursement supported by the petty cash receipts and other disbursement evidence. The receipts and other disbursement evidence. The custodian receives a company check to replenish custodian receives a company check to replenish the fund. the fund.

If it is decided that the amount of cash in the petty If it is decided that the amount of cash in the petty cash funds is excessive, an adjustment may be cash funds is excessive, an adjustment may be made. made.

Entries are made to the Petty Cash account only to Entries are made to the Petty Cash account only to increase or decrease the size of the fundincrease or decrease the size of the fund

No Description Journal

1 An establishment of petty cash fund Petty Cash Cash

xxx  xxx

2 Payment expenses by the petty cash custodian

No Entry    

3 Receiving disbursement evidences and replenished petty cash

Kinds of Expenses xxx  

    Cash xxx

4 Petty cash funds are too small and needed to increase petty cash fund balance

Petty Cash Xxx  

    Cash   xxx

5 Petty cash funds are too much and needed to decrease petty cash fund balance

Cash xxx  

    Petty Cash xxx

5 At the end of period, to make an adjusting entries (If there are unrecorded transactions)

Kinds of Expenses xxx  

    Petty Cash   xxx

6 At the beginning of next period, the reversing entries is developed

Petty cash xxx  

    Kinds of Expenses

  xxx

Date Description Journal (Rp)

2008 1 Airlangga, Corp established petty cash funds Rp. 10,000,000

Petty Cash 10,000,000

March Cash 10,000,000

14 The petty cash receipts indicate expenditures for the following items:

No Entries

• Office supplies Rp. 5,000,000

• Postage expenses Rp. 500,000

• Utility expenses Rp. 3,000,000

• Miscellaneous expenses Rp. 300,000

15 Replenished petty cash funds Office supplies 5,000,000

Postage expenses 500,000

Utility expenses 3,000,000

Miscellaneous expenses

300,000

Cash 8,800,000

Date Description Journal (Rp)

2008 16 Petty cash funds are too small and needed to increase petty cash fund balance, Rp. 2,500,000

Petty Cash 2,500,000

March Cash 2,500,000

31 At the end of period, the expenditures are unrecorded for the following items:

Adj.

• Postage expenses Rp. 300,000 Postage expenses 300,000

• Utility expenses Rp. 1,200,000 Utility expenses 1,200,000

• Miscellaneous expenses Rp. 100,000

Miscellaneous expenses

100,000

Petty Cash 1,600,000

April 1 At the beginning of the next period, the reversing entries to be made

Petty Cash 1,600,000

Postage expenses 300,000

Utility expenses 1,200,000

Miscellaneous expenses

100,000

No.No. Imprest SystemImprest System Fluctuating SystemFluctuating System1.1. The petty cash funds balance is The petty cash funds balance is

fixedfixedThe petty cash funds balance is The petty cash funds balance is fluctuating. It depends on the fluctuating. It depends on the amount of receipts and amount of receipts and disbursements in petty cash fundsdisbursements in petty cash funds

2.2. The expenditures of petty cash The expenditures of petty cash funds just recorded at funds just recorded at replenished petty cash fundsreplenished petty cash funds

Each expenditure must be Each expenditure must be recorded at the transaction recorded at the transaction occuredoccured

3.3. The function of petty cash The function of petty cash recording is as a tool of control recording is as a tool of control and it can not be posted to and it can not be posted to general ledgergeneral ledger

The function of petty cash The function of petty cash recording is as a journal. It is used recording is as a journal. It is used to be a source of posting to each to be a source of posting to each account in general ledgeraccount in general ledger

4.4. It is necessary to make It is necessary to make adjusting entries for adjusting entries for unrecorded transaction at the unrecorded transaction at the end of period. The beginning of end of period. The beginning of the next period must be made the next period must be made reversing entriesreversing entries

It is not necessary to make It is not necessary to make adjusting entries for unrecorded adjusting entries for unrecorded transaction at the end of period. transaction at the end of period. Adjusting entries are made at the Adjusting entries are made at the beginning of the next periodbeginning of the next period

The Fluctuating SystemA. The differences between imprest system and fluctuating system

No.No. DescriptionDescription Journal Journal

1.1. An establisment of petty An establisment of petty cash fundcash fund

Petty Cash xxxPetty Cash xxx Cash xxxCash xxx

2.2. Payment expenses by the Payment expenses by the petty cash custodian petty cash custodian

Kinds of expenses xxx Kinds of expenses xxx Petty Cash xxxPetty Cash xxx

3.3. Petty cash funds are too Petty cash funds are too small and needed to small and needed to increase petty cash fund increase petty cash fund balance balance

Petty Cash xxxPetty Cash xxx Cash xxxCash xxx

4.4. Receiving disbursement Receiving disbursement evidences and replenished evidences and replenished petty cash petty cash

Petty Cash xxxPetty Cash xxx Cash xxxCash xxx

B. The Procedures of Recording Petty Cash Fund in General Journal

DateDate DescriptionDescription Journal (Rp)Journal (Rp)

20082008 11 Kartika, Corp establishes petty cash funds Rp. Kartika, Corp establishes petty cash funds Rp. 10,000,00010,000,000

Petty Cash 10,000,000

MarchMarch Cash 10,000,000

33 Purchasing office supplies Rp. 5,000,000Purchasing office supplies Rp. 5,000,000 Office SuppliesOffice Supplies 5,000,0005,000,000

Petty Cash 5,000,0005,000,000

44 Payment to postage expenses Rp. 500,000Payment to postage expenses Rp. 500,000 Postage ExpensesPostage Expenses 500,000500,000

Petty Cash 500,000500,000

77 Payment to utility expenses Rp. 3,000,000Payment to utility expenses Rp. 3,000,000 Utility ExpensesUtility Expenses 3,000,0003,000,000

Petty Cash 3,000,0003,000,000

1010 Payment to Miscellaneous expenses Rp. Payment to Miscellaneous expenses Rp. 300,000300,000

Miscellaneous Miscellaneous expenses expenses

300,000300,000

Petty Cash 300,000300,000

1414 Petty cash funds are too small and needed to Petty cash funds are too small and needed to increase petty cash fund balance, Rp. increase petty cash fund balance, Rp. 2,500,0002,500,000

Petty Cash CashCash

2,500,0002,500,0002,500,0002,500,000

1515 Replenished petty cash funds Rp. 6,000,000Replenished petty cash funds Rp. 6,000,000 Petty Cash 6,000,0006,000,000

CashCash 6,000,0006,000,000

a. Recording of Petty Cash Transactions to General Journal in Fluctuating System

b. The general Journal is posted to petty cash account in general journal b. The general Journal is posted to petty cash account in general journal

DateDate DescriptionDescription RefRef Debit (Rp)Debit (Rp) Credit (Rp)Credit (Rp)BalanceBalance

DebitDebit CreditCredit

20082008 11 CashCash 33 10,000,00010,000,000    10,000,00010,000,000   

MarchMarch 33 Office Supplies Office Supplies 33    5,000,0005,000,000 5,000,0005,000,000   

   44 Postage expenses Postage expenses

33    500,000500,000 4,500,0004,500,000   

   77 Utility expenses Utility expenses

33    3,000,0003,000,000 1,500,0001,500,000   

   1010 Miscellaneous Miscellaneous expenses expenses 33

  300,000300,000 1,200,0001,200,000

  

   1414 CashCash 33 2,500,0002,500,000    3,700,0003,700,000   

   1515 CashCash 33 6,000,0006,000,000    9,700,0009,700,000