Chapter 10
Cash Controls
310
Petty cash is usually operated on what is known as an
imprest system.
An imprest system for petty
cash ensures that spending is limited to the amount available in petty cash fund. For example, if
a petty cash fund starts with $100, that is the maximum amount that can be spent. When the
amount spent approaches the $100 limit, the petty cash fund will be replenished up to $100.
setting up a Petty Cash Fund
1.
Designate one individual as the petty cash custodian.
There are many ways in which petty
cash can be mishandled. Having one person responsible for the fund increases transparency
and accountability. The petty cash custodian ensures that petty cash is properly safeguarded
and disbursed for legitimate reasons and that an accurate record is maintained for all activities
related to the fund.
2.
Establish the amount of the fund.
The petty cash custodian needs to determine the amount of
the fund as well as the frequency with which it is replenished.
3.
Record the initial petty cash transaction.
The establishment of a petty cash fund requires one
initial transaction.The journal entry is shown in Figure 10.28.
Journal
Page 1
Date
2016
account title and explanation
Debit Credit
Dec 10 Petty Cash
100
Cash
100
To set up the petty cash fund
______________
FIGURE 10.28
4.
Require users of petty cash to provide receipts.
Any employee who requires petty cash
must provide a receipt from the supplier indicating the amount of money spent. The petty
cash custodian will require the person to sign the receipt, indicating that the person has been
reimbursed. Figure 10.29 shows a petty cash receipt.
______________
FIGURE 10.29
7 00
RECEIVED IN PETTY CASH
Date:
December 13, 2016
Description
Amount
Received By
Approved By
TOTAL
Office supplies
7 00
Rebecca McGillivray
FIGURE 10.29
ASSETS
CASH
PETTY CASH
–
$100 CR
+
$100 DR
