PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

CHAPTER 9 Controls over cash and petty cash payments

Learning outcomeTo examine internal controls over

cash and to establish and maintain a petty cash system

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

KEY TERMS

• Internal controls over cash

• Petty cash payments

• Petty cash flowchart

• The petty cash book and ledger accounts

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

GENERAL INTERNAL CONTROLS• Keep monies not banked in safe areas

• Segregate duties

• Observe rotation of staff duties

• Use pre-numbered documents in all transactions

• Conduct regular reconciliations of bank accounts, accounts payable and accounts receivable

• Clearly define staff responsibilities and duties

• Exercise controls over investments

9-3

PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

INTERNAL CONTROLS OVER CASH RECEIPTS

• Bank daily

• Record mail receipts in remittance book and stamp ‘A/c payee only’ on cheques

• Use pre-numbered receipts and cash register tapes

• Account for all documents, including those cancelled

• Segregate duties

• Conduct regular bank reconciliations

• Reconcile cash register tapes with actual takings

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

INTERNAL CONTROLS OVER CASH PAYMENTS• Stamp payment cheques ‘not negotiable’

• Ensure electronic payment software secure and password protected

• Use pre-numbered cheques and documents

• Segregate duties

• Conduct regular bank reconciliations

• Ensure credit card and all payments are properly authorised

9-5

PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

Reconciliation of daily cash takings and supplies

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

Bank deposit form

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

PETTY CASH ADVANCE ACCOUNT

• Petty cash advance is an asset and establishes the fund

• Petty cash asset account does not change unless petty cash float is increased

• Increase in petty cash float is recorded in cash payments journal as:

DR: Petty cash (asset)CR: Bank (cheque account)

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

PETTY CASH ADVANCE ACCOUNT cont.Petty cash used for minor expenses:

– taxi or train fares– tea, coffee, milk– postage stamps– small stationery items

Petty cash expenditure is recorded on reimbursement of float in cash payments journal as:

DR: Various expense a/csCR: Bank (cheque account)

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

PETTY CASH FLOWCHARTPetty cash advance

established

PaymentPetty cash imprest

Petty cash book

Cash paymentsJournal

Reimbursement

Ledger accountsfor posting

of expenses

Voucher Payment

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

PETTY CASH VOUCHERSUsed to record amounts reimbursed or used from petty cash float

Receipts and details of purchase attached to petty cash voucher

No. 45 Petty Cash Voucher

Date: ……………………………………… 6 JunePaid to: …………………………………. C ChungFor:…………………………………………TravelAccount: ……………………………….Taxi faresAmount:…………………………$23.00 (incl. GST)

Received: C Chung

Authorised by: T. Tully

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

GST AND PETTY CASH• GST included in most petty cash transactions

• Petty cash expenditure recorded on reimbursement of float in cash payments journal as:

DR: Various expense a/cs

GST input tax credits

CR: Bank (cheque account)

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

INTERNAL CONTROL AND SECURITY• Internal checks and reconciliation completed by

independent officer (only if advance is large)

• Reimbursements authorised by petty cash officer

• Refunds of payments in advance banked and recorded in cash receipts journal

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PPTs to accompany Accounting and Bookkeeping Principles and Practice by AAT & David Willis 2011 McGraw-Hill Australia Pty Ltd

SUMMARY• Petty cash is used for minor expenses

• Petty cash imprest system maintains control over these cash payments

• A petty cash book and vouchers are used to record small payments

• GST is recorded on reimbursement

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