Accounting 10
Module 3
Lesson 13
Accounting 10
1
Lesson 13
Accounting 10
2
Lesson 13
Lesson Thirteen - Petty Cash Fund
Topics:
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The Petty Cash Fund
Establishing The Fund
Using The Petty Cash Fund
Replenishing Petty Cash
Remember These Important Points
Do You Understand?
Conclusion
Self Test
Answers For Self Test
After studying this lesson, the student should be able to
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discuss the purposes of keeping a petty cash fund.
describe how a petty cash system works.
prepare petty cash vouchers for use in a petty cash system.
record payments from the petty cash fund into a petty cash record.
prepare accounting entries in the general journal to establish a petty cash fund,
replenish the petty cash fund, and record petty cash short and over.
Accounting 10
3
Lesson 13
The Petty Cash Fund
Read page 388 – 393W
Writing cheques for small expenditures is costly and time consuming so many businesses set up a petty
cash system. This system is designed to control small (petty) expenditures.
Study the flow chart that illustrates a Petty Cash System found on page 388 of your text.
Note the 3 main areas – establishing the fund, recording petty cash and replenishing the fund.
To establish the fund a cheque is issued to one person the person who will be in charge of this fund. The
cheque is not issued to Petty Cash because if this cheque was lost anyone would be able to cash it.
Therefore it is made out to the name of the person who will be controlling this fund. When the cheque is
cashed the money is kept in a locked money box or drawer. Depending upon the type of business the
amount of this cheque is on an average between 50 to 200 dollars.
This fund is a fixed sum loaned or set aside from the cash in the bank. Accountants call
this system of lending money the imprest system of petty cash. The imprest system is
widely used because the amount borrowed can be redeposited at any time into the bank
account. As a way to control cash, accountants support the imprest system because a
cheque payment is required both to create the fund and also to replenish it.
Study the illustration found below and also the illustration on page 389 of your text which shows
how the petty cash fund is established and recorded.
General Journal
Date
20__
Page
Post
Ref.
Account Title
Debit
2 0 0
Credit
00
2 0 0
Petty Cash
Cash
To establish petty cash fund.
Note: Petty Cash is a current asset
Accounting 10
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Lesson 13
00
Using the Petty Cash Fund
Individual petty cash payments do not go through the accounting records. Petty cash
vouchers must be issued for all disbursements. For control purposes, these vouchers are
prenumbered documents showing evidence of a petty cash payment. (See the petty cash
voucher on the next page.) This voucher represents the source document, providing proof
of the transaction. If an invoice is received for an expenditure, it would be stapled to the
voucher, providing additional proof of the transaction that is filled out when money is
removed from the petty cash fund. A petty cash voucher shows the following information:
a.
voucher number
b.
date (year, month, day)
c.
reason for payment
d.
account charged for the payment
e.
signature of person who received funds
f.
signature of approval by petty cash clerk
Petty Cash Voucher
a
1
No. __________
Sept. 1
Date: __________20xx
b
Region Stationers
6.88
Paid to: _______________________
$ __________
c
office supplies
For: _______________________________________
Supplies Account
Charge to: _________________________________
e
Payment Received
Approved by:
R.L.
__________________
W.H.
______________
d
f
No journal entries are required at this time. Each time cash is taken out of the petty cash
box, it is replaced with a voucher. If an invoice is received for an expenditure, it would be
attached to the voucher.
At any given time the cash in the box plus the value of the vouchers in the box should
total $200.00.
Accounting 10
5
Lesson 13
The Petty Cash Book
Businesses will often record each expense in a Petty Cash Book. This book is not a journal but rather a
summary of all expenditures.
Study the illustration on page 391 of your text.
Replenishing Petty Cash
As bills and vouchers are paid out, a point will be reached where the actual cash in the
petty cash box will reach a minimum amount. This minimum amount is usually set by the
office manager. When this happens, the petty cash record will be totaled and ruled. The
cash in the petty cash box needs to be replenished. Replenishing the petty cash fund
means bringing the cash in the fund back to the original amount.
Steps involved in replenishing the petty cash fund are listed on page 391 of your text.
Since a cheque has to be issued in order to replenish this fund the entry is recorded in the Cash Payments
Journal. The amount is credited to the bank (cash) account and the individual expenditures are recorded
in various expense accounts.
Study the illustrations on page 392
Petty Cash Summary
When the petty cash fund becomes depleted it is necessary to prepare a petty cash summary. This
summary is a request to replenish the fund and so this summary is given directly to the person who
issues the cheques.
Study the example of a Petty Cash Requisition (Summary) on page 392 of your text.
Cash Short and Over Transactions
No matter how well a system is set up, mistakes are made in handling and recording cash
When this happens, the cash on hand is either “short” or “over” the amount recorded.
Analyzing Cash Shortages
If a comparison of the accounting entries and the actual cash indicates that less cash was collected than
was recorded, there is said to be a cash shortage In order to reduce the cash amount recorded, you must
make a credit entry to Cash and a debit entry to an account called Cash Short and Over. This entry is
recorded in the Cash Payment Journal.
Take a look at the example given on page 422 of your text which shows the General Journal Entry
for Cash Short and Over.
Accounting 10
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Lesson 13
Analyzing Cash Overages
If the accounting record to the cash indicates that more cash was collected than was recorded, there is
said to be a cash overage. To correct this a debit entry is made to Cash and a credit entry is made to a n
account called Cash Short and Over. This entry is recorded in Cash Receipts Journal
Take a look at the example given on page 422 of your text which shows the General Journal
entry for Cash Short and Over.
Remember These Important Points
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A petty cash fund is established to make payments of small bills.
This method of paying small bills eliminates the need to process many
cheques for small amounts of money.
A maximum dollar amount is set for the fund.
A record of payments is kept in the petty cash box.
When the fund gets low, a petty cash summary is made and a request for
replenishing the fund is sent to the accounting department.
Cash Short and Over is a general ledger account whose DR balance is an
expense (cash short) and whose CR balance is revenue (cash over).
Do You Understand?
Petty Cash Fund - a small quantity of cash that is kept in the office for small
expenditures.
Petty Cash System -a system designed to control small expenditures.
Petty Cash Voucher - prenumbered documents showing evidence of a petty cash
payment.
Petty Cash Record - a non-accounting record for the use of the petty cashier to
summarize petty cash transactions.
Imprest System - a loan or advance of money from the main Cash (chequing) account.
Accounting 10
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Lesson 13
Replenishing the Petty Cash Fund - to remove the vouchers from the petty cash box
and bring the amount of cash in the box back up to the stipulated amount, ready to start a
new month.
Conclusion
A petty cash fund is established to make payments of small bills. This method of paying
small bills eliminates the need to process many cheques for small amounts of money.
A maximum dollar amount is set for the fund. A record of payments is kept in the petty
cash box. When the fund gets low, a petty cash summary is made and a request for
replenishing the fund is sent to the accounting department.
Self Test
.
On June 1, a petty cash fund was established with cheque #22 in the amount of $50.
You are responsible for approving all vouchers.
On June 15 of the current year, Mickey, one of the administrative assistants, took
$4.50 out of the petty cash for the purchase of several boxes of paper clips from
Reliable Stationery.
Tom Stiller worked overtime on June 18. Tom asked you for $9.00 to pay for his
supper.
On June 15, a courier delivered an express letter and charged $3.75 for delivery of
the package. The courier gave Mickey a bill for the $3.75.
Instructions:
Prepare voucher number 1 for the paper clips. Charge the amount to Office
Supplies.
Make out voucher number 2 for the supper money. Charge the amount to
Miscellaneous Expense.
Prepare voucher number 3 for the courier service and charge to Delivery Expense.
From the information supplied to you for vouchers 1, 2 and 3, record the
information on page 1 of the petty cash record.
Accounting 10
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Lesson 13
2.
You are the petty cash clerk. On the form provided, summarize the items that appear in
the following petty cash record. Replenishment cheque #176 is authorized by the manager, Ted
Smothers. You are the petty cash clerk.
Petty Cash Voucher
No. __________
Date: __________20xx
Paid to: _______________________ $ __________
For: _______________________________________
Charge to: _________________________________
Payment Received
Approved by:
__________________
______________
Petty Cash Voucher
No. __________
Date: __________20xx
Paid to: _______________________ $ __________
For: _______________________________________
Charge to: _________________________________
Accounting 10
Payment Received
Approved by:
__________________
______________
9
Lesson 13
Petty Cash Voucher
No. __________
Date: __________20xx
Paid to: _______________________ $ __________
For: _______________________________________
Charge to: _________________________________
Accounting 10
Payment Received
Approved by:
__________________
______________
10
Lesson 13
Petty Cash Record
Pe tty
C ash
Date
Explanation
20_
Vchr.
Distribution of Payme nts
Re ce ipts
Payme nts
Supplie s
No.
Brought Forward
1 0 0 00
Cash in Fund
Totals
Cash in Fund
Nov.30
Replenish fund ChH176
30 Carried Forward
Accounting 10
1 0 0 00
1
8
3 00
1
6 00
0
0 00
6 2 00
De live ry
Misc.
Expe nse
Expe nse
1 1 00
O the r Payme nts
Account
Amount
1 0 00
1 6 00
8 3
1 0 0 00
Petty Cash Clerk
Manager
____________________
____________________
Cheque No. issued __________
Date _______________
11
Lesson 13
3.
Complete the following petty cash record for November 30, 20--. You have been
given the balances of the various expenses on page 2 of the petty cash record. The
fund has a beginning balance on November 1, 20--, of $200.00. The remaining cash
balance before replenishment was $ 72.00.
Petty Cash Record
Month of
Page
Petty
Cash
Date
19__
Explanation
Vchr.
Receipts
Payments
Supplies
No.
Delivery
Expense
Distribution of Payments
Misc.
Other Payments
Expense
Account
Amount
Pe tty
Cash
Date
Explanation
20_
Vchr.
Distribution of Payme nts
Re ce ipts
Payme nts
Supplie s
No.
Jan.1 1 Brought Forward
Totals
Accounting 10
2 0 0
00
2 0 0
00
1 2 6 00
12
4 0 00
De live ry
Misc.
Expe nse
Expe nse
2 1 00
O the r Payme nts
Account
1 5 00
Amount
0
Lesson 13
Instructions:
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4.
Verify that the total expenses equal the total payments.
Calculate if there was a cash short and over.
Write in the Cash Short and Over transaction if required.
Complete the record; the fund was replenished with cheque #77.
You are asked to complete page 1 of the following petty cash record for
January 31, 20--. The fund had a beginning balance of $100.00 on January
1, 20--. The remaining cash in the petty cash box was $8.00.
Pe tty
Cash
Date
Explanation
20_
Vchr.
Distribution of Payme nts
Re ce ipts
Payme nts
Supplie s
No.
Jan.1 1 Brought Forward
Totals
1 0 0
00
1 0 0
00
4 4 00
2 5 00
De live ry
Misc.
Expe nse
Expe nse
1 1 00
O the r Payme nts
Account
8 00
0
Instructions:
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Verify that the total expenses equal the total payments.
Calculate if there was a cash short and over.
Write in the Cash Short and Over transaction if required.
Complete the record; the fund was replenished with cheque #94.
Accounting 10
13
Amount
Lesson 13
5.
On July 1, 20--, the petty cash fund for Sally’s Typing Service is as follows:
Cash in petty cash box
$ 89.55
Bills and Vouchers
Miscellaneous Expense
Supplies
Delivery Expense
Supplies
Supplies
Miscellaneous Expense
Miscellaneous Expense
Delivery Expense
Total
15.09
17.03
16.00
17.54
19.00
17.00
4.30
2.49
108.45
The fund is established for $200.00.
Instructions:
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Prepare a petty cash summary for the month of June to replenish the petty
cash fund.
Journalize the accounting entry by issuing cheque #51 to replenish the petty
cash fund on page 2 of the general journal for June 30, 20--.
Accounting 10
Petty Cash Clerk
Manager
____________________
____________________
Cheque No. issued __________
Date _______________
14
Lesson 13
General Journal
Date
20__
Page
Post
Ref.
Account Title and Explanation
Debit
Credit
Answers for Self Test
Petty Cash Voucher
1
No. __________
Petty Cash Voucher
June 15
Date: __________20xx
2
No. __________
June 18
Date: __________20xx
Real Stationery
4.50
Paid to: _____________________
$ __________
Meal Allowance
9.00
Paid to: _____________________
$ __________
paper clips
For: _____________________________________
meal allowance
For: _____________________________________
Office Supplies
Charge to: _______________________________
Miscellaneous Expense
Charge to: _______________________________
Payment Received
Approved by:
Payment Received
Approved by:
M.H
__________________
.
Your initials
_____________
T.S.
__________________
Your initials
_____________
Petty Cash Voucher
3
No. __________
June 25
Date: __________20xx
Jim’s Courier Service $ __________
3.75
Paid to: _____________________
express letter
For: _____________________________________
Delivery Expense
Charge to: _______________________________
`
Accounting 10
Payment Received
Approved by:
M.H
__________________
.
Your initials
_____________
15
Lesson 13
Pe tty
Cash
Date
Explanation
20_
Vchr.
Distribution of Payme nts
Re ce ipts
Payme nts
Supplie s
No.
June 1 Established Fund Ch22
De live ry
Misc.
Expe nse
Expe nse
O the r Payme nts
Account
15 Purchased Paper Clips
4 50
18 Meal Allowance
9 00
25 Courier Service
3 75
4 50
9 00
3 75
Question 2
Request to Replenish Petty Cash
Petty Cash Summary
Month Ended November 30, 20xx
1. Supplies
2. Delivery Expense
3. Miscellaneous Expense
Total Disbursements
Cash in Fund
Amount of Petty Cash Fund
Accounting 10
Amount
5 0 00
6
1
1
8
1
1 0
2
1
0
3
6
0
00
50
00
50
50
00
Petty Cash Clerk
Manager
____________________
____________________
Cheque No. issued __________
Date _______________
16
Lesson 13
0
Question 3
Pe tty
C ash
Date
Explanation
20_
Nov.
Vchr.
Distribution of Payme nts
Re ce ipts
Payme nts
Supplie s
No.
1 Brought Forward
De live ry
Misc.
Expe nse
Expe nse
O the r Payme nts
Account
Amount
2 0 0 00
Totals
2 0 0 00
1
Cash in Fund
Totals
2 0 0 00
2
6
00
7
2
00
1 9
8
Cash Short
Totals
2 0 0 00
Cash in Fund
2
0
4 0 00
3 1 00
1 5 00
0
oo
2
00
Cash short
0
00
and over
2 oo
7 2 00
Replenish fund CH94
1 2 6 00
Carried Forward
2 0 0 00
Question 4
Pe tty
C ash
Date
Explanation
20_
Jan.
Vchr.
Distribution of Payme nts
Re ce ipts
Payme nts
Supplie s
No.
1 Cash in Fund
31 Totals
1 0 0
00
1 0 0
00
9
Cash in Fund
Totals
1 0 0
00
1 0
Cash Over
Totals
Cash in Fund
Replenish fund CH94
Carried Forward
4
00
8
00
2
00
8
00
9 2
00
1 0 0
00
1
0
Misc.
Expe nse
Expe nse
1 1 00
O the r Payme nts
Account
8 00
0
00)
0
00
Cash short
and over
Question 5
Request to Replenish Petty Cash
Petty Cash Summary
Month Ended June 30. 20xx
Accounting 10
Amount
oo
(2
1 0 0
7 5 00
De live ry
17
Lesson 13
(
2 00)
Miscellaneous Expense
Supplies
Delievery Expense
Total Payments
Cash in Fund
Total Cash and Vouchers
1
3
5
1
0
8
9
Cash Short
Amount of Fund
2
0
1
Cheque No. issued __51__
_Your Name
Petty Cash Clerk
6
3
8
8
9
8
2
0
39
57
49
45
55
00
00
00
Date ___June 30, 20xx
_______________
Manager
General Journal
Page
Date
20__
Account Title
June 30 Miscellaneous Expense
Supplies
Delivery Expense
Cash short and Over
Cash
To replenish petty cash fund
Accounting 10
Post
Ref.
Debit
3 6 39
5 3 57
1 8 49
2 00
Credit
1 1 0
18
Lesson 13
45