Topic 6 - Small Claims

Lesson 4 – Preparing the petty cash book

page 1

   

 

Now that you have examined a completed petty cash book closely, you will be guided through the process of preparing one yourself.

Assume you are the Petty Cashier at a business called Riverbend Trends and will be preparing the petty cash book.  This petty cash book will be used again in Lesson 5, so file it away safely.

   
Guided practice

 Step 1 – Getting the information for the petty cash book

As you know, the first step in preparing a business’s bookkeeping records is to locate the source information. 

 

Click on the thumbnail to open the petty cash book.  Print it out.

   
Print Click to open the petty cash book.
   
 

The petty cash book is to be prepared from the petty cash vouchers, as well as the butt from the advance cheque and/or reimbursement cheques.  As Riverbend Trends’ petty cash fund has not yet been established, you will need the advance cheque butt:

   
  Cheque butt
   
Print

You will also need the completed petty cash vouchers for the period.  Click on the thumbnail to access the document containing the vouchers and print them:

  Open the vouchers and print them
   
 

You will also need the following information:

 

The petty cash period for Riverbend Trends is 1 week (7 days); therefore the petty cash book is to be totalled on 7 April, 2012.

   

Guided practice

 Step 2 – Preparing the petty cash book

 

Important point

Don’t forget to use a blue or black pen and to correct errors properly, i.e. don’t use correction fluid or tape!

 
 

You will notice that the three specialised headings under Analysis of Expenditure are missing in the Petty Cash Book of Riverbend Trends. When the fund is being set up, the most common expenditure categories are chosen as the specialised headings.

Look at the petty cash vouchers.  Are there any account names that appear next to the Charge: heading on more than one voucher?  You’ll see that Stationery appears twice, so this should be one of the headings.  As there are no other categories that appear more than once, you will need to choose the accounts that would be more likely to be used again for petty cash expenditure.  A clue might be the items that are likely to be for smaller amounts of money, such as Fares and Catering expenses. 

  • Write in the three headings, in alphabetical order, for the three columns under Analysis of Expenditure.

The headings should now look like this:

   
 
   
 

At the moment there is no money showing in the balance of the petty cash fund, so you need to record the petty cash advance cheque:

  • Write the year on the first line of the Date column.
  • On the next available line, record the date of the petty cash advance cheque, April 1.
  • In Particulars you need to record the details of the change in the petty cash fund.  This is the receipt of money from the petty cash advance cheque, so write in Petty Cash Advance, cheque number 000333.
  • Now record the amount of the advance cheque (the imprest amount of $50.00) in the Cash Receipts column – this shows that money has been received by the petty cash fund.
  • Record the new balance of the petty cash fund – 50.00 – in the Balance column.

Your petty cash book should now look like this:

   
 
   
 

Now you’re ready to begin recording the details of petty cash expenditure from each of the vouchers.  Record the details from voucher number 1:

  • As the first petty cash voucher was prepared on the same date as the advance cheque, April 1, there is no need to repeat the date on the new line.
  • You need to record the details of the change in the petty cash fund. In the Particulars column write correction fluid as this is what was purchased, and what is written next to For:.
  • Record the voucher number (1) in the Voucher number column.
  • Now record the amount of the payment in the Cash Payments column.  Note that this amount is inclusive of GST, therefore the amount you need is the one recorded under Total on the voucher:  3.70.
  • The GST must be shown in the GST column.  Find the GST amount on the petty cash voucher and record it in the petty cash book: 0.34.
  • Now show the GST-exclusive amount (the figure shown next to Amount (exc. GST): on the voucher) in the correct Analysis of Expenditure column, ie Stationery3.36.
  • Finally, adjust the balance of the petty cash fund.  Expenditure reduces the balance, so you need to subtract the amount paid out of the fund, ie deduct the amount written in the Cash Payments column, from the balance still in the fund after the previous entry:  50.00 – 3.70 = 46.30. Record this new balance in the Balance column.

Your petty cash book should look like this:

   
 
   
 

Enter the details from the remaining vouchers, numbers 2 – 6.

Check that your petty cash book looks like this:

   
 
   
 

Now that all the vouchers have been recorded and you have reached the last day of the petty cash period the amount columns need to be totalled.

  • Rule a red line under all the columns that show money coming out of the petty cash fund (ie the Cash Payments, GST, Catering expenses, Fares, Stationery and Sundries columns) to show that you are adding together the figures above the line. 
   
Important point

The Cash Receipts column is not totalled because it is changed only when money is put into the fund. 
The Balance column is not totalled because its figure is adjusted after every change to the fund; the last figure in this column represents the updated balance amount, so no totalling is required.

   
 
  • Add all the figures in the Cash Receipts column and write the answer on the next available line.  Show the total with a dollar sign.
  • Total the Cash Payments, GST, Catering expenses, Fares, Stationery and Sundries columns.
  • Rule a double red line under all the totals.

You can check that your totals are correct by cross-adding related totals: 

  • Add the GST and the four Analysis of expenditure column totals together.  Your answer should agree with the Cash Payments column total.  This is because the analysis columns’ amounts do not include GST, so when they are added to the total of the GST column, the answer should agree with the total amount of cash paid out of the petty cash fund.
  • Now add the Cash Payments column total and the last figure in the Balance column together.  The answer should equal $50 – the imprest amount.  This is because:
   
 

Check that your completed petty cash book looks like this:

 

   
   
   

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