CASH CONTROL

(Voucher System, Petty Cash Fund and Bank Reconciliation Statement)

VOUCHER SYSTEM Voucher system is a set of procedures, special journals, and authorization forms designed to provide control over cash payments. Voucher a form with spaces provided for data about a liability that the company must pay. Data include: 1. creditors name and address 2. description of the goods and services received 3. invoice number 4. terms of payment 5. due date 6. amount due 7. spaces for signatures of those approving the liability for payment. Special Journals Used 1. Sales journal for sales transactions 2. Cash receipts journal for cash collections 3. Voucher register for all transactions to be paid 4. Check register for check payments made Note: a. Purchases journal is changed to Voucher register and Cash payments journal is changed to Check register b. Transactions that cant be recorded in the special journals should be recorded in the General Journal Steps to be followed in a voucher system: 1. The invoice or statement of account supporting the purchase or receipt of services must be verified and checked as to correct specifications, price and arithmetical computation. 2. A voucher is then prepared to support the disbursement with the invoice or statement of account attached to it authenticating the voucher. Three signatories must sign the voucher. 3. The voucher is recorded in the Voucher Register and filed in the Unpaid File. 4. Once the voucher is approved for payment, which is usually on due date, a check is prepared with two signatories signing it. The date and check number are copied in the voucher. Then it is recorded in the Check Register. 5. The voucher is filed in Paid File after the check is delivered to the payee and the invoice or statement of account marked paid to avoid duplication of payment. HESalendrez
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Pro-forma Entries: 1. Voucher Register: To set up an obligation for all payments to be made Expenses / Purchases etc. Vouchers Payable 2. Check Register: To record payment of voucher Vouchers Payable Cash 3. General Journal: To record return of merchandise Vouchers Payable Purchase Returns and Allowances

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PETTY CASH FUND It is a small amount of currency from which to make small payments. A petty cash custodian is designated to handle the petty cash fund. The PCF operation involves the following: 1. Establishment To start the fund, a voucher is prepared and a check is drawn payable to the Petty Cashier or Petty Cash Custodian. The check is then encashed and placed in a box ready for disbursement. 2. Disbursement When cash is taken from the petty cash box, a petty cash voucher has to be prepared and approved by a person with authority and then signed by the person receiving the cash. 3. Replenishment When the PCF reaches a minimum balance which may insufficient to take care of the small expenses, then it is time for replenishment. All amount paid out of the PCF will be reimbursed or returned to the fund. There are two methods of handling petty cash: 1. Imprest fund system Petty cash fund is maintained at a fixed amount. Payments are supported by petty cash vouchers and recorded through memo entries in the petty cash book. The fund is replenished when it is exhausted or when the remaining balance is not enough to meet the average requirements for the day.

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At the end of the accounting period, either the fund is replenished or an adjusting entry is prepared to record the unreplenished expenses. The amount of petty cash fund may be increased or decreased.

2. Fluctuating fund system The checks drawn to replenish the fund do not necessarily equal the petty disbursements Replenishments checks are prepared upon request of the petty cashier. Petty cash disbursements are immediately recorded thus resulting in a fluctuating cash balance. Cash Over and Short Account 1. This is the account used when the petty cash fund fails to prove out. 2. This is debited when there is a cash shortage. There is a cash shortage when the cash count shows cash which is less than the balance per book. (Petty cash receipts + Remaining petty cash on hand) < Imprest amount This account may be closed to a receivable or loss account. 3. This is credited when there is a cash overage. There is a cash overage when the cash count shows cash which is more than the balance per book. (Petty cash receipts + Remaining petty cash on hand) > Imprest amount This account may be closed to a liability or miscellaneous income account.
Pro-forma Entries Imprest System

Establishment of fund

Petty cash fund Cash in bank Expenses Cash in bank Expenses Petty cash fund Petty cash fund Expenses Petty cash fund Cash in bank Cash in Bank Petty cash fund

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Replenishment of fund

Adjusting entry at the end of accounting period Reversing entry at the start of accounting period Increase in fund

Decrease in fund

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Cash shortage

Expenses Cash over and short Cash in bank Receivable from petty cashier/ Loss from cash shortage Cash over and short

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Cash overage

Expenses Cash over and short Cash in bank Cash over and short Payable to Petty cashier/ Miscellaneous income

BANK RECONCILIATION STATEMENT Bank Reconciliation Statement - is a statement the company prepares to reconcile the difference between the cash balance shown on the ban statement and the cash balance on the companys books. Bank Statement - is a statement issued (usually monthly) by a bank describing the activities in a depositors checking account during the period. Debit Memo is a form used by bank to explain deduction from the depositors account. Credit Memo - is a form used by bank to explain addition to the depositors account. Reconciling Items 1. Deposit in transit a days cash receipts recorded in the depositors books in one period but recorded as a deposit by the bank in the succeeding period. 2. Outstanding checks are checks issued by a depositor that has not been presented to the bank for payment. 3. Service charges are amounts deducted by the bank to cover the cost of handling the checking account. 4. NSF check is a customers check returned from the bank because the customers checking account balance was insufficient to cover the check. 5. Notes collected by bank proceeds of note collected by the bank for the depositor. 6. Book errors 7. Bank errors HESalendrez
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Steps in Preparing Bank Reconciliation Statement 1. Determine the balance per bank and the balance per books as at cutoff date, which is usually the end of the month. 2. Compare the cash receipts deposited by the company against the deposit column of the bank statement. Tickmark () the amounts found in both books. The amount without tickmarks is either the deposit in transit or credit memo. 3. Compare the checks issued and recorded by the company against the check column of the bank statement. Tickmark () the amounts if found in both books. The amount without tickmarks is either the outstanding check or a debit memo. Adjusting Entries 1. Adjusting entries for book reconciling items and errors of depositor should be prepared in the books of the business. 2. This is necessary to bring the cash in bank balance to its correct balance for balance sheet presentation. Pro-forma Bank Reconciliation under the Adjusted Balances Method xxx Company Bank Reconciliation Statement December 31, 20xx Balance per book/ledger Add: Bank credit memos Book errors Sub-total Less: Bank debit memos Book errors Adjusted cash balance Balance per bank Add: Deposits in transit Bank errors Sub-total Less: Outstanding checks Bank errors Adjusted cash balance Pxxx Pxxx xxx xxx xxx xxx xxx xxx Pxxx Pxxx Pxxx xxx xxx xxx xxx xxx xxx Pxxx

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Pro-forma Entries Adjusting Entries NSF check Accounts receivable Cash in bank Miscellaneous expense Cash in bank Notes/Loans Payable Interest expense Cash in bank Cash in bank Notes receivable Interest income Cash in bank Notes/Loans Payable xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

Bank service fees/charge

Payment of bank loan with interest expense

Collection of notes receivable

Proceeds of bank loan

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