PETTY CASH FUND
MANAGEMENT
PETTY CASH FUND MANAGEMENT
I. Definition of Cash
•
Cash is the standard medium of exchange and the basis for
measuring and accounting for all other items
•
It is generally classified as current assets
•
Cash consists of coin, currency, an available funds on
deposit at bank and other financial institutions.
•
Cash must be immediately available for the payment of
current obligation and must be free from any contractual
restriction. It is available for unrestricted withdrawal.
II. Classification of Cash
A. Cash in Bank
• It is included saving accounts, R/C
B. Cash on Hand
• It is available in the company for
paying daily operational expenses.
• Cash on hand is prepared to pay
for small payment called petty cash
III. How
is Petty Cash Transaction
Controlled and Reported?
As control measures of petty cash fund, the procedures are
widely used:




One person is usually given the responsibility of operating
the petty cash fund
Each time an expenditure is made, a source document
(called a petty cash voucher) is prepared for payment
evidence. The voucher is signed by the person receiving the
cash and by the person in charge of the fund (petty cashier).
The petty cash voucher includes the amount and purpose of
the expenditure.
A record (usually multi columned) is kept to record each
expenditure from the petty cash fund
Each time the fund is almost depleted and also at the end of
every accounting period, a check is prepared for the amount
spent and cashed to replenish the petty cash fund.
PETTY CASH RECEIPT
No.
121
Paid to
For
Charge to
Date
August 1, 2001
Metropolitan Times
Daily Newspaper
Miscellaneous
Amount
3 00
Administrative Expense
Payment received:
S.O. Hall
Approve by
N.E.R
IV. The Methods of Petty Cash Fund
 The Imprest System
 The Fluctuating System
The Imprest System
A. A simple method in obtaining reasonable control while
adhering to the rule of disbursement by check
B. The imprest system works as followed:
• Someone is designed petty cash custodian and given a
small amount of currency from which to make small
payments. The transfer of funds to petty cash is
recorded.
• As disbursements are made the petty cash custodian
obtains signed receipts from each individual to whom
cash is paid. If possible, evidence of the disbursement
should be attached to the petty cash receipt.




Petty cash transaction is not recorded until the fund
is reimbursed and then such entries are recorded by
other person besides the petty cash custodian
When the supply of cash runs low, the custodian
presents a request to the general cashier for
reimbursement supported by the petty cash receipts
and other disbursement evidence. The custodian
receives a company check to replenish the fund.
If it is decided that the amount of cash in the petty
cash funds is excessive, an adjustment may be
made.
Entries are made to the Petty Cash account only to
increase or decrease the size of the fund
No
Description
Journal
1
An establishment of petty cash fund
Petty Cash
Cash
2
Payment expenses by the petty cash
custodian
No Entry
3
Receiving disbursement evidences and
replenished petty cash
Kinds of Expenses
xxx
xxx
xxx
Cash
4
Petty cash funds are too small and needed
to increase petty cash fund balance
Petty Cash
Xxx
xxx
Cash
5
Petty cash funds are too much and needed
to decrease petty cash fund balance
Cash
xxx
xxx
Petty Cash
5
At the end of period, to make an adjusting
entries (If there are unrecorded
transactions)
Kinds of Expenses
xxx
xxx
Petty Cash
6
At the beginning of next period, the
reversing entries is developed
Petty cash
Kinds of Expenses
xxx
xxx
xxx
Date
2008
Description
1
March
14
Journal (Rp)
Airlangga, Corp established petty cash
funds Rp. 10,000,000
Petty Cash
The petty cash receipts indicate
expenditures for the following items:
No Entries
10,000,000
Cash
10,000,000
• 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
Postage expenses
Utility expenses
Miscellaneous
expenses
Cash
5,000,000
500,000
3,000,000
300,000
8,800,000
Date
2008
March
Description
Journal (Rp)
16 Petty cash funds are too small and
Petty Cash
needed to increase petty cash fund
Cash
balance, Rp. 2,500,000
31 At the end of period, the expenditures
are unrecorded for the following items:
2,500,000
2,500,000
Adj.
• Postage expenses Rp. 300,000
Postage expenses
• Utility expenses Rp. 1,200,000
Utility expenses
• Miscellaneous expenses Rp. 100,000 Miscellaneous
expenses
300,000
1,200,000
100,000
Petty Cash
April
1
At the beginning of the next period, the
reversing entries to be made
Petty Cash
Postage expenses
Utility expenses
Miscellaneous
expenses
1,600,000
1,600,000
300,000
1,200,000
100,000
The Fluctuating System
A. The differences between imprest system and fluctuating system
No.
Imprest System
Fluctuating System
1.
The petty cash funds balance is The petty cash funds balance is
fixed
fluctuating. It depends on the
amount of receipts and
disbursements in petty cash funds
2.
The expenditures of petty cash
funds just recorded at
replenished petty cash funds
Each expenditure must be
recorded at the transaction
occured
3.
The function of petty cash
recording is as a tool of control
and it can not be posted to
general ledger
It is necessary to make
adjusting entries for
unrecorded transaction at the
end of period. The beginning of
the next period must be made
reversing entries
The function of petty cash
recording is as a journal. It is used
to be a source of posting to each
account in general ledger
It is not necessary to make
adjusting entries for unrecorded
transaction at the end of period.
Adjusting entries are made at the
beginning of the next period
4.
B. The Procedures of Recording Petty Cash Fund in General Journal
No.
Description
Journal
1.
An establisment of petty
cash fund
Petty Cash
Cash
2.
Payment expenses by the
petty cash custodian
Kinds of expenses xxx
Petty Cash
xxx
3.
Petty cash funds are too
small and needed to
increase petty cash fund
balance
Receiving disbursement
evidences and replenished
petty cash
Petty Cash
Cash
xxx
xxx
Petty Cash
Cash
xxx
4.
xxx
xxx
xxx
a. Recording of Petty Cash Transactions to General Journal in Fluctuating System
Date
2008
Description
1
Kartika, Corp establishes petty cash funds Rp.
10,000,000
March
Journal (Rp)
Petty Cash
10,000,000
Cash
3
Purchasing office supplies Rp. 5,000,000
Office Supplies
10,000,00
0
5,000,000
Petty Cash
4
Payment to postage expenses Rp. 500,000
Postage Expenses
5,000,000
500,000
Petty Cash
7
Payment to utility expenses Rp. 3,000,000
Utility Expenses
500,000
3,000,000
Petty Cash
10
Payment to Miscellaneous expenses Rp.
300,000
Miscellaneous
expenses
3,000,000
300,000
Petty Cash
14
15
300,000
Petty cash funds are too small and needed to
increase petty cash fund balance, Rp.
2,500,000
Petty Cash
Cash
2,500,000
Replenished petty cash funds Rp. 6,000,000
Petty Cash
6,000,000
Cash
2,500,000
6,000,000
b. The general Journal is posted to petty cash account in general journal
Balance
Date
Description
Ref
Debit (Rp)
Credit (Rp)
Debit
2008
1
Cash
3
10,000,000
10,000,000
March
3
Office Supplies
3
5,000,000
5,000,000
4
Postage expenses
3
500,000
4,500,000
7
Utility expenses
3
3,000,000
1,500,000
10
Miscellaneous
expenses
3
300,000
1,200,000
14
Cash
3
2,500,000
3,700,000
15
Cash
3
6,000,000
9,700,000
Credit