Dbs3024 biz trx week 6 petty cash


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Petty cash, IMPREST system

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Dbs3024 biz trx week 6 petty cash

  1. 1. Petty Cash and the IMPREST system DBS3024 BUSINESS TRANSACTION by Stephen Ong Visiting Fellow, Birmingham City University Business School Visiting Professor, Shenzhen University
  2. 2. • Petty Cash1 • The imprest system2 • The Bank Cash Book3 Today’s Overview
  3. 3. 1 - 3 Learning objectives  Explain why many organisations use a petty cash book  Make entries in a petty cash book  Transfer the appropriate amounts from the petty cash book to the ledgers at the end of each period  Explain and operate the imprest system for petty cash  Explain why some organisations use a bank cash book  Make entries in a bank cash book
  4. 4. 1 - 4 1 Petty Cash
  5. 5. 1 - 5 The petty cash book  Every business has a number of transactions of very small value that would clutter the cash book.  By recording these transactions in the petty cash book, it frees the cash book for important transactions.  Using a petty cash system allows a junior member of staff to have some responsibility.
  6. 6. 1 - 6 The petty cash system  When petty cash is being claimed, the claimant will have to fill in a voucher, detailing what the expenditure was for.  A bill or receipt for the expenditure should be attached to the voucher.  The claimant should sign the voucher to certify that their expenses had been received from the petty cashier.
  7. 7. Petty Cash Voucher CLAIMAN CLAIMANT Number Date Description of Expense Claims Amount of Expense Claims (RM) Petty Cashier TOTAL (RM)
  8. 8. Example of Receipt as Evidence
  9. 9. Petty Cash Transactions
  10. 10. Petty Cash Book
  11. 11. Cash Book & General Ledger
  12. 12. 1 - 12 2 The Imprest System
  13. 13. 1 - 13 The imprest system  A petty cash book run under the imprest system allows enough cash to meet petty cash expenditure for a particular period.  At the end of the period, the cashier determines the amount spent.  In exchange for the vouchers, the cashier tops the petty cashier’s float up to the original level.
  14. 14. The IMPREST System
  15. 15. 1 - 15 An example of the imprest system
  16. 16. 1 - 16 An analytical petty cash book
  17. 17. 1 - 17 The postings from the petty cash book
  18. 18. 1 - 18 3 The Bank Cash Book
  19. 19. 1 - 19 Bank cash book  Nowadays, many businesses have only a small number of sales that are paid for with cash and credit cards, cheques, and direct transfers are used.  In this case, a business may choose to run a petty cash book and a bank cash book, meaning that all cash payments are entered into the petty cash book and the bank cash book contains the bank and discount columns only.  A bank cash book has an extra column to detail what has been banked.
  20. 20. 1 - 20 Bank cash book (Continued)
  21. 21. 1 - 21 4 Activity
  22. 22. Activity : Petty Cash Vouchers
  23. 23. 1 - 27 Learning outcomes You should have now learnt: 1.That the petty cash book saves (a) the cash book and (b) the ledger accounts from containing a lot of trivial detail 2.That the use of the petty cash book enables the cashier or a senior member of staff to delegate this type of work to a more junior member of staff 3.That the cashier should periodically check the work performed by the petty cashier
  24. 24. 1 - 28 Learning outcomes (Continued) 4.That all payments made by the petty cashier should have petty cash vouchers as evidence of proof of expense 5.How to enter petty cash transactions into the petty cash book 6.How to transfer the totals for each expense recorded in the petty cash book to the appropriate ledger accounts
  25. 25. 1 - 29 Learning outcomes (Continued) 7. How to operate a float system for petty cash 8. The difference between a cash book and a bank cash book 9. Why some organisations use a bank cash book instead of a cash book
  26. 26. Resources : Core Reading  Wood, Frank and Robinson, Sheila (2009) Bookkeeping and Accounts ,7th Edition, 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
  27. 27. QUESTIONS?