ACTY 2100 - My Lecture Notes on Petty Cash (From November 11) PDF

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November 11 Petty Cash try to pay everything with a check, but somethings need to have cash Postal worker has postage due on envelope you need to pay right then you don’t want to/don’t have time to go through the voucher system pay with cash b/c it is more convenient and easier for everyone almost all businesses have a petty cash fund cash available to make small disbursements decide how large the fund should be, $100 Petty Cash100 Cash 100 Petty Cash is an asset it is added to cash at the EOY because you can spend it at anytime unlike the change fund which can’t be spent which is why it isn’t added to cash at the EOY slips called Petty Cash Slips or Petty Cash Vouchers are filled out when petty cash is disbursed they fill out the date, amount, and the reason Ex. November 11, $20, for postage due they are used to account for petty cash they are filled out every time petty cash is used to acknowledge where the money went at some point they run at of petty cash when it run lows, get out the petty cash slips/vouchers need to replenish the cash that is gone account for the slips Postage Expense 20 Misc. Expense 20 Delivery Expense 20 Cash 60 (to bring the petty cash fund back to where it should be) use it for a taxi cab fee if you are working overtime and your car breaks down Owners can get out petty cash w/o accounting for it it is had to account for the money when this is done b/c they usually don’t fill out a slip it is usually accounted for as Travel and Entertainment Expense or Misc. Expense Sometime it is short b/c someone forgot to fill out a slip it is still an expense, regardless of if the slip got filled out, you have to make it balance Petty Cash Custodian is in charge of the petty cash fund write a check so there is a record that the cash was added and how much was added it creates a paper fund for this account, which makes it easier to account for on an audit you ask the custodian to count the cash and write down their number, then the accountant counts it, then the custodian counts the cash one more time to double check it is all there, they sign/initial the paper, it gives confidence that the right amount was there When you start or add money to the petty cash fund, use this journal entry Petty Cash 100 Cash 100 Always replenish the fund with a check (so there is a paper trail) when it runs low and on the

very last day of the year you want to account for all the expenses you can petty cashs adds to the accounting for assets, so you need to make sure it’s there it is only all there right after you replenish it It is often times a box, sometimes a file folder, sometimes a desk drawer Bank Reconciling all activity is shown in the cash account balances should be the same as in the cash account and the checkbook bank keeps track of all the activity and you receive a bank statement of all the activity make sure your accounting and the bank’s accounting is correct it is not hard, but it is tedious it is usually correct, but there are errors sometimes you can’t rely on the bank to always be correct you don’t have to do this, but you should Compare our accounting with the bank’s accounting Service charges our on the statement so balances will be different b/c you haven’t accounted for the service charge yet, but the bank has deduct the service charge from the cash balance per the books You want the balances to be identical there is also a charge for paper checks deduct this from the balance in the books Automatic deductions you can arrange for these if you want them electric company (bill comes showing that it will be deducted from your account on a day) have to make an accounting entry Electric Expense Cash remember to make an accounting entry for this or ours and the bank’s balances won’t be the same if you forget, you can make an entry based on the reconciliation Use a debit card have to account for the purchases or you can catch them when you reconcile Automatic Collections pay rent as a deposit to the landlord’s account at the bank the renter may get a discount for paying in this fashion when it shows up on the bank statement, you can reconcile it also for dividends on stock

Customer pays with a check for $300 Cash

300

Sales 300 have to deposit the check that day if there is no money in the person’s account the bank will send back the check b/c there wasn’t sufficient funds the usually procedure is to redeposit the check a second time usually it cashes b/c sometimes time float and get it wrong the first time meaning they think they have enough money, but they don’t so the check bounces if it doesn’t go through the second time, it is stamped NSF in red across the check you don’t re-deposit now you have to call the customer usually they will send a new check, but you have to be patient, then deposit that one sometimes they have moved or went out of business meaning they have defrauded your company take it to the County Prosecutor's Office in Marshall fill out a form and leave it they don’t spend a lot of time looking into it, unless one person wrote a lot of bad checks even if the person is prosecuted, you probably won’t get your money the accounting entry for NSF checks is Sales 300 Cash 300 it washes out the original entry the totals should be identical after all the items have been taken care of reconciling is usually done every month, you have to do it at least every year If there are errors, look at who made the error? if it is the bank you fix it in the bank’s column this doesn’t happen often, but they are always happy to fix it it is usually your error you have to fix it in your books usually flip the numbers a good error is when you discover you have more money than you thought a bad error is when you discover you have less money than you thought forget to deposit a check and find it many months later try to deposit it and they send it back b/c it is stale (meaning old) you can send the check with a note back to the business, so they can account for it they will usually send you a new check to replace the one that was stale if you write a check and mail it off, it may have not be received or deposited yet when you come to the cut off period, the bank doesn’t know about the check so it won’t be there what the bank says you have is more than what you think you have to make a deduction from the bank to make up for outstanding checks this should make the two numbers equal if you deposit money just before the cut off date

they haven’t had time to account for it yet, so it doesn’t show on the bank statement yet you have to add it to the bank’s balance, so they will be equal this is called Deposit is in Transit...