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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 Date August 1, 2001

Paid to Metropolitan Times Amount


3 00
For Daily Newspaper

Charge to Miscellaneous 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 xxx
Cash xxx
2 Payment expenses by the petty cash No Entry
custodian
3 Receiving disbursement evidences and Kinds of Expenses xxx
replenished petty cash
Cash xxx
4 Petty cash funds are too small and needed Petty Cash Xxx
to increase petty cash fund balance
Cash xxx
5 Petty cash funds are too much and needed Cash xxx
to decrease petty cash fund balance
Petty Cash xxx
5 At the end of period, to make an adjusting Kinds of Expenses xxx
entries (If there are unrecorded
transactions)
Petty Cash xxx
6 At the beginning of next period, the Petty cash xxx
reversing entries is developed
Kinds of Expenses xxx
Date Description Journal (Rp)
2008 1 Airlangga, Corp established petty cash Petty Cash 10,000,000
funds Rp. 10,000,000
March Cash 10,000,000
14 The petty cash receipts indicate No Entries
expenditures for the following items:

• 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 300,000
expenses

Cash 8,800,000
Date Description Journal (Rp)
2008 16 Petty cash funds are too small and Petty Cash 2,500,000
needed to increase petty cash fund
March Cash 2,500,000
balance, Rp. 2,500,000
31 At the end of period, the expenditures Adj.
are unrecorded for the following items:
• 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 100,000
expenses
Petty Cash 1,600,000
April 1 At the beginning of the next period, the Petty Cash 1,600,000
reversing entries to be made
Postage expenses 300,000
Utility expenses 1,200,000
Miscellaneous 100,000
expenses
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 Each expenditure must be
funds just recorded at recorded at the transaction
replenished petty cash funds occured
3. The function of petty cash The function of petty cash
recording is as a tool of control recording is as a journal. It is used
and it can not be posted to to be a source of posting to each
general ledger account in general ledger
4. It is necessary to make It is not necessary to make
adjusting entries for adjusting entries for unrecorded
unrecorded transaction at the transaction at the end of period.
end of period. The beginning of Adjusting entries are made at the
the next period must be made beginning of the next period
reversing entries
B. The Procedures of Recording Petty Cash Fund in General Journal

No. Description Journal

1. An establisment of petty Petty Cash xxx


cash fund Cash xxx

2. Payment expenses by the Kinds of expenses xxx


petty cash custodian Petty Cash xxx

3. Petty cash funds are too Petty Cash xxx


small and needed to Cash xxx
increase petty cash fund
balance
4. Receiving disbursement Petty Cash xxx
evidences and replenished Cash xxx
petty cash
a. Recording of Petty Cash Transactions to General Journal in Fluctuating System

Date Description Journal (Rp)


2008 1 Kartika, Corp establishes petty cash funds Rp. Petty Cash
10,000,000 10,000,000
March Cash 10,000,00
0
3 Purchasing office supplies Rp. 5,000,000 Office Supplies 5,000,000
Petty Cash 5,000,000
4 Payment to postage expenses Rp. 500,000 Postage Expenses 500,000
Petty Cash 500,000
7 Payment to utility expenses Rp. 3,000,000 Utility Expenses 3,000,000
Petty Cash 3,000,000
10 Payment to Miscellaneous expenses Rp. Miscellaneous 300,000
300,000 expenses
Petty Cash 300,000
14 Petty cash funds are too small and needed to Petty Cash 2,500,000
increase petty cash fund balance, Rp. Cash 2,500,000
2,500,000
15 Replenished petty cash funds Rp. 6,000,000 Petty Cash 6,000,000
Cash 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 Credit

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