All About Petty Cash

Hi all ......

 

My post is based on actual experience which is the result of the application of working in some companies and some positions.

This time I want to share about "Petty Cash" which is often used and applied in the company. Fortunately, guys … this is also a homework that is not easy for me because I do not want any confusion between the Petty Cash and Cash itself.

Previously I will explain why I apply Petty Cash in the financial system.

The underlying things are:

1. Cash Balance is not so excessive

With the existence of the Petty Cash, the cash disbursed from the Bank are only the Cash Balance specified. So, there is a small possibility of depositing corporate funds in the hands of the Cashier.

2. Tighter verification

With the Petty Cash Holder, Finance and Accounting have been assisted in the verification process. This verification is done when the person submits a proof of the transaction.

3. Cash opname Intensity is more routine

Frequency of Cash Opname becomes more routine and more orderly because when charging itback, Finance and Accounting will do automatically a Cash Opname to thepettycash.

4. Entry the data of petty cash become faster

Accounting can record the expenditure of the Petty Cash without having to wait too long 

because all evidence will be submitted by the Finance / Petty Cash Holders 

(after Cash Opname) to Accounting Staff in the process of PettyCash Replenishment.

5. Manipulation over Expenditures are identified more quickly

If there is abuse of the company's money derived from Petty Cash. 

In addition, irregularities will be known to the operational field by the evidence 

that is not fair.

Up to this explanation, hopefully we all can understand the benefits of the Petty Cash . 

Once we have shared the benefits, let's talk about Petty Cash sources. 

Petty Cash Income is only obtained from Petty Cash Replenishment. 

So, the balance will always go back to normal once it's refilled. 

Next, I will explainPetty Cash Expenses Categories which are allowed or not allowed 

to be financed from our Cash. In principle there is no standard rule on this. 

The results of reason and consideration and mutual agreement in company by themselves. 

But usually it is based on the purpose of the establishment of this Petty Cash.

Honestly this is not easy guys ... 

I had to formulate about 2 days to determine the category and the underlying category.

The category and the underlying that I’ve made is: 

1.    Petty Cash is not to buy a Fixed Assets category

This is because the decision of purchasing Asset is not the authority of 

the Petty Cash holder (officer).

      2. The economical age of goods is not more than 1 year

          Since this is not for purchasing of Fixed Assets, the economic age of purchasing 

          goods with is generally not more than 1 year.

      3. The amount of money in Petty Cash is not so big

          For this, it is flexible depending on company policy. 

          If I used to be nominal 100 thousand rupiahs as a limit.

      4. Not easy to change hands of authority

          If we look at the point 2 earlier, then this economic age can be due to the type of 

          goods is quickly exhausted / worn before 1 year. 

          Easily a handed item will make the economic life of the goods cannot be 

          expected for more than 1 year. Example: Calculator.

      5. Excluding Large Operating Cost 

          Large Operational Costs should be excluded from the Bank or Cash where 

          the authority to issue is in the management ranks. 

          For example: electricity costs, fuel bill costs etc.

      6. Not to lend to employees

          The reason is the same as category 1 and 3.

Note: The category must be valid without exception (not "OR" but "AND")

Well ... up to this I hope you all not confused but get deeper understanding 

of the characteristics from Petty Cash.

After this I will try to discuss Petty Cash system that usually used by an accounting.

The common method is imprest system method where the petty cash holder does not 

do the bookkeeping when the expenses are incurred, but the bookkeeping is done 

by Accounting when refilling occurs. Efficient right?

In Imprest System method has some stages of the process, there are: 

1. Petty Cash Formation

This process is petty cash is filled with money that can be used to finance the operational 

expenses. Usually the formation is done by Finance or Accounting and the money 

is handed over to the petty cash holder. The common used form is the Cash form.

Pettycash should be stored in a safe place and by using a security code. 

By using a padlock too actually.

 2. Use of Petty Cash

The proof of expenditure on the pettycash, theholder hands over the nominal money stated 

on the evidence after verifying the transaction. The evidence is stored until it will be 

reported later.

3. Refilling Petty Cash

If the petty cash usage period has arrived or the remaining balance has been thinned, 

the holder may apply for a refill by creating the related form. 

The evidence to be reported is prepared along with the rest of the existing 

petty cash money. 

Finance or Accounting perform the calculation of the remaining and also calculate 

the total nominal evidence available.

Calculation: 

Beginning of pettycash balance - Total nominal proof = Petty Cash Remaining Currency

Once all are declared to be appropriate, accounting may record the expenditure 

of the petty cash in the general journal against the petty cash vs. expense account. 

The expense account depends on the type and usefulness of the expenditure. 

Finance disbursed the money to replenish the petty cash order to keep the petty cash 

balanced. 

4. Cash Expenditure

In some places I’ve been work, there is a system submission called cash receipt. 

Usually after the expenditure is realized, the new evidence is submitted along with 

the remaining cash. For the following case, if the filling has not been realized, 

then I use the assumption that "The unrealized cash proof is the same as the unused 

cash balance". This means that the value of cash receipt is considered to be a petty cash 

money that has not been used. WHY is it? The problem is again we see the impact of it. 

If the cash receipt has been considered as proof of expenditure and then booked by 

an accounting then it will happen double expense (same cost repeated). 

In addition, evidence of cash receipt is not acceptable as evidence of expenditure. 

Okay, we go to the next stage that is about the Difference in Petty cash.

In fact, there is a lot of evidence that the value is not even in accordance with the current 

currency denominations of our country. This will make the difficulties of 

the petty cash holder withdraw the money to conform the value of the Transaction Proof. 

But do not worry, it is not a fundamental or crucial issue in the implementation of 

Petty Cash Management.

 DIFFICULTY IN PETTY CASH

1. Proceeds at the expense of Petty cash

For examples there is transaction gives a note worth Rp. 100, 

after verified the note is replaced with nominal Rp. 120. 

Here there will be a "Less Difference" because Petty cash money will become smaller 

than it should be. 

2. Rounding numbers

For examples again if there is evidence with a nominal value of Rp. 153 and then the 

Petty Cash Holder agrees with the person to replace it with a value of Rp. 150. 

Here will definitely happen "More Difference" and vice versa.

TREATMENT OF DIFFERENCES ON PETTY CASH

1. More Differences (due to Cash Negligence)

If there is any more difference due to the Negligence of the Petty cash Holder, 

then I ask Accounting staff to record it as Other Income. 

That's because I'm not likely to raise the risk of a claiming who is entitled to the excess. 

If it is accepted, it is obliged to be approved first by the management.

2. More Differences (due to Rounding Numbers)

If there is more increment due to Rounding Numbers, then I ask Accounting to record it 

as part of Other Revenue account categories. For foreign companies usually use the term 

Positive Variance Account.

3. Difference in Less (due to Negligence of Petty cash Holder)

If there is any inconsistency due to the Negligence of the pettycash holder, then I ask 

the holder to take responsibility for it by replacing the shortfall. Accounting does not 

record it as Miscellaneous Cost or Loss. That way Finance will only recharge Petty cash 

worth by total amount of Evidence minus Replacement from Petty cash holder.

4. Difference in Less (due to Rounding of Numbers)

If there is any increment due to Rounding Numbers, then I ask Accounting to record it as 

part of the Other Costs account category. For foreign companies usually use the term 

Negative Variance Account. In some companies there are also noted as a loss.

Ok guys ... it is possible that the REFUSES OF PETTY CASH EVIDENCE ...

See you again guys and have a nice great day for all of you.