PETTY CASH
- General Review for Students
A very important practice of a business organization, maintenance of daily bases of small expenses in every company. Mostly students when complete their education degree and apply for a job they don't have knowledge of petty cash. It is the most important practice which is asked in an interview. Try to learn it completely, if there are any queries then asked any time.
There are main five accounts use in petty cash. it is technical knowledge we must to keep in mind the following accounts on the bases of debit and credit.
- Assets > Debit account
- Liabilites > Credit Account
- Income /Sales /Revenue > Credit Account
- Expenses > Debit Account
- Owner equity > Credit account
2. Background Study of Petty Cash.
There is only two account will be used from above accounts
- Assets
- Expenses
Assets account the all the property of business including, land labor, capital, organization.
Ø On the bases of nature we classify the assets on two types
- Tangible assets: which we can touch physically available in nature.
i.e. Land, building, car etc. - Intangible assets: which we cannot touch and not available in physical form. I.e. Common seal, customer etc.
Ø On the bases of time frame Assets is classified into two type.
- Current assets: including cash, petty cash (Cash in Hand), receivable and anything which is easy to convert into cash.
- Fixed assets: is for long-term and cannot easily convert into cash, i.e. building etc.
3. Introduction of Petty Cash:
It is the statement in which we record the expenses of daily bases. Petty cash belongs to assets Current Assets or cash in hand. It is debit account and variable every time.
- INCREASE IN CASH IS WILL BE RECORDED DEBT THE CASH
- DECREASE IN CASH WILL BR RECORDED CREDIT IN CASH
THE ENTRIES WILL BE
WE ADD THE 10000 CASH TO PETTY CASH ACCOUNT
PETTY CASH 10000 DR
CASH 10000 CR
WE RECORD EXPENSE AGAINST PETTY CASH ACCOUNT
HOSPITALITY EXPENSE 50 DR
CASH 50 CR
There is a lot of expenses which is we recorded on daily bases. i.e.
Cleaning Expense
Hospitality Expense
Telephone Expense
Internet Expense
Petrol Expense
Electricity Expense
Maintenance Expense
IT Expense
Software Expense
Water Expense
Accrued Expense
Newspaper Expense
Visa Expense
Transportation Expense
Printing and Stationary Expense
Car Loan
Subscription Expense
Medical Expense
Staff Accommodation Expense
Marketing Expense
Cost of Goods Sold
Advertising Expense
Bank Fees
Depreciation Expense
Payroll Tax Expense
Rent Expense
Supplies Expense
Utilities Expense
Wages Expense
Other Expenses
All the expenses will be record on same base in which expense against cash will be debit as a result the cash account will be credit. i.e.
XYZ EXPENSE DR
CASH / BANK CR
HOW WE WILL RECORD THE ENTRIES IN ANY SOFTWARE USE IN YOUR COMPANY.
Mostly there is some software is used for the transaction which makes easier the financial statement preparing on one click like, Quick Book, Peachtree, Tally, Focus etc.
The software we are working is Focus 7 which is most advanced software for financial management.
4. STEPS OF RECORDING IN PETTY CASH
- The supplier will provide invoice against purchasing. (ATTACHED THE PICS
- check the invoices,
Character of Invoice
ü Company name
ü Serial number
ü Date
ü Product quantity
ü Total Amount
ü Sales Tax Amount/VAT (Value Added Tax)
ü Supplier stamp
ü Supplier sign
ü Accountant sign
- Check the product/purchases that are already received or not.
- If Received there will be delivery notes also attached if not attached then confirm it from by checking himself, by detail quantity, quality etc. it is the responsibility of accountant to confirm the product.
- After proper confirmation of everything record the expenses in petty cash.
- If possible also record in excel sheet.
- The above transaction which is already recorded.
- Make a file for petty cash for every month.
- Make a print of every day with support invoices and keep in the file.
- Maintain the file on daily bases.
- At the end of month print a ledger for petty cash account from software and tally petty cash voucher with ledger amount, it will be equal if not equal the check it some things will be missing.
- Reconcile the petty cash, it is very must that petty cash in and out will be equal and will be in debt.
Character of Invoice
ü Company name
ü Serial number
ü Date
ü Product quantity
ü Total Amount
ü Sales Tax Amount/VAT (Value Added Tax)
ü Supplier stamp
ü Supplier sign
ü Accountant sign
