Dbs3024 biz trx week 6 petty cash

Petty Cash and Petty Cash and the IMPREST systemthe IMPREST system

Petty Cash and Petty Cash and the IMPREST systemthe IMPREST system

DBS3024 BUSINESS TRANSACTIONDBS3024 BUSINESS TRANSACTION

byStephen Ong

Visiting Fellow, Birmingham City University Business School

Visiting Professor, Shenzhen University

Today’s Overview Today’s Overview

1 - 3

Learning objectivesLearning objectives

Explain why many organisations use a petty Explain why many organisations use a petty cash bookcash book

Make entries in a petty cash bookMake entries in a petty cash book Transfer the appropriate amounts from the Transfer the appropriate amounts from the

petty cash book to the ledgers at the end of petty cash book to the ledgers at the end of each periodeach period

Explain and operate the imprest system for Explain and operate the imprest system for petty cashpetty cash

Explain why some organisations use a bank Explain why some organisations use a bank cash bookcash book

Make entries in a bank cash bookMake entries in a bank cash book

1 - 4

11Petty CashPetty Cash

1 - 5

The petty cash bookThe petty cash book Every business has a number of Every business has a number of

transactions of transactions of very small value very small value that would clutter the cash book.that would clutter the cash book.

By recording these transactions in By recording these transactions in the petty cash book, it the petty cash book, it frees the frees the cash book cash book for important for important transactions.transactions.

Using a petty cash system allows a Using a petty cash system allows a junior member of staff to have junior member of staff to have some some responsibility.responsibility.

1 - 6

The petty cash systemThe petty cash system When petty cash is being claimed, When petty cash is being claimed,

the claimant will have to fill in a the claimant will have to fill in a vouchervoucher, detailing what the , detailing what the expenditure was for.expenditure was for.

A A bill or receipt bill or receipt for the expenditure for the expenditure should be attached to the voucher.should be attached to the voucher.

The The claimant should sign claimant should sign the the voucher to certify that their voucher to certify that their expenses had been received from expenses had been received from the petty cashierthe petty cashier..

Petty Cash VoucherPetty Cash Voucher

CLAIMACLAIMANTNT

CLAIMANTCLAIMANT

NumbeNumberrDatDatee

Description Description of of

Expense Expense ClaimsClaims

Amount Amount of of

Expense Expense Claims Claims (RM)(RM)

Petty Petty CashierCashier

TOTAL TOTAL (RM)(RM)

Example of Receipt as EvidenceExample of Receipt as Evidence

Petty Cash TransactionsPetty Cash Transactions

Petty Cash BookPetty Cash Book

Cash Book & General LedgerCash Book & General Ledger

1 - 12

22The Imprest SystemThe Imprest System

1 - 13

The imprest systemThe imprest system

A petty cash book run under the A petty cash book run under the imprest system imprest system allows enough cash allows enough cash to to meet petty cash expenditure for a meet petty cash expenditure for a particular period.particular period.

At the end of the period, the cashier At the end of the period, the cashier determines the determines the amount spentamount spent. .

In exchange for the vouchers, the In exchange for the vouchers, the cashier cashier tops the petty cashier’s float up tops the petty cashier’s float up to the original level.to the original level.

The IMPREST SystemThe IMPREST System

1 - 15

An example of the imprest systemAn example of the imprest system

1 - 16

An analytical petty cash bookAn analytical petty cash book

1 - 17

The postings from the petty cash bookThe postings from the petty cash book

1 - 18

33The Bank Cash BookThe Bank Cash Book

1 - 19

Bank cash bookBank cash book Nowadays, many businesses have Nowadays, many businesses have only a small only a small

number of sales that are paid for with cashnumber of sales that are paid for with cash and and credit cards, cheques, and direct transfers are credit cards, cheques, and direct transfers are used. used.

In this case, a business may choose to run a In this case, a business may choose to run a petty cash book and a bank cash book, petty cash book and a bank cash book, meaning that all meaning that all cash payments are entered cash payments are entered into the petty cash book into the petty cash book and the bank cash and the bank cash book contains the bank and discount columns book contains the bank and discount columns only.only.

A bank cash book has an extra column to detail A bank cash book has an extra column to detail what has been banked.what has been banked.

1 - 20

Bank cash book (Continued)Bank cash book (Continued)

1 - 21

44ActivityActivity

Activity : Petty Cash VouchersActivity : Petty Cash Vouchers

1 - 27

Learning outcomesLearning outcomesYou should have now learnt:You should have now learnt:1.1. That the petty cash book saves (a) the That the petty cash book saves (a) the

cash book and (b) the ledger accounts cash book and (b) the ledger accounts from containing a lot of trivial detailfrom containing a lot of trivial detail

2.2. That the use of the petty cash book That the use of the petty cash book enables the cashier or a senior member enables the cashier or a senior member of staff to delegate this type of work to a of staff to delegate this type of work to a more junior member of staffmore junior member of staff

3.3. That the cashier should periodically That the cashier should periodically check the work performed by the petty check the work performed by the petty cashiercashier

1 - 28

Learning outcomes Learning outcomes (Continued)(Continued)

4.4. That all payments made by the petty That all payments made by the petty cashier should have petty cash cashier should have petty cash vouchers as evidence of proof of vouchers as evidence of proof of expenseexpense

5.5. How to enter petty cash transactions How to enter petty cash transactions into the petty cash bookinto the petty cash book

6.6. How to transfer the totals for each How to transfer the totals for each expense recorded in the petty cash expense recorded in the petty cash book to the appropriate ledger accountsbook to the appropriate ledger accounts

1 - 29

Learning outcomes Learning outcomes (Continued)(Continued)

7.7. How to operate a float system for petty How to operate a float system for petty cashcash

8.8. The difference between a cash book The difference between a cash book and a bank cash bookand a bank cash book

9.9. Why some organisations use a bank Why some organisations use a bank cash book instead of a cash bookcash book instead of a cash book

Resources : Core ReadingResources : Core Reading

Wood, Frank and Robinson, Sheila Wood, Frank and Robinson, Sheila (2009) (2009) Bookkeeping and Accounts Bookkeeping and Accounts ,7,7thth Edition, Pearson/ FT Prentice HallEdition, Pearson/ FT Prentice Hall

Wood, Frank and Sangster, Alan (2012) Business Accounting ,12th Edition, Pearson/ FT Prentice Hall

Fortes, Hilary (2011) Accounting Simplified , Pearson/ FT Prentice Hall

QUESTIONS?QUESTIONS?