ACTBAS2 Cash Control

8/13/2019 ACTBAS2 Cash Control

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

VOUCHER SYSTEM

Voucher system – is a set of procedures, special journals, and authorization formsdesigned to provide control over cash payments.

Voucher – a form with spaces provided for data about a liability that the company mustpay.

Data include:1. creditor’s name and address 2. description of the goods and services received3. invoice number4. terms of payment

5. due date6. amount due7. spaces for signatures of those approving the liability for payment.

Special Journals Used1. Sales journal – for sales transactions2. Cash receipts journal – for cash collections3. Voucher register – for all transactions to be paid4. Check register – for check payments made

Note:a. Purchases journal is changed to Voucher register and Cash payments journal

is changed to Check registerb. Transactions that can’t 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 arithmeticalcomputation.

2. A voucher is then prepared to support the disbursement with the invoice orstatement of account attached to it authenticating the voucher. Three signatoriesmust 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 isprepared with two signatories signing it. The date and check number are copied inthe 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 theinvoice or statement of account marked “paid” to avoid duplication of payment.



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Pro-forma Entries:1. Voucher Register:

To set up an obligation for all payments to be madeExpenses / Purchases etc. xxx

Vouchers Payable xxx

2. Check Register: To record payment of voucher

Vouchers Payable xxxCash xxx

3. General Journal: To record return of merchandise

Vouchers Payable xxxPurchase Returns and Allowances xxx

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. EstablishmentTo start the fund, a voucher is prepared and a check is drawn payable to thePetty Cashier or Petty Cash Custodian. The check is then encashed andplaced in a box ready for disbursement.

2. DisbursementWhen cash is taken from the petty cash box, a petty cash voucher has to beprepared and approved by a person with authority and then signed by theperson receiving the cash.

3. ReplenishmentWhen the PCF reaches a minimum balance which may insufficient to takecare 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 anadjusting 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 thepetty 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 Account1. 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 xxxCash in bank xxx

Replenishment of fund Expenses xxxCash in bank xxx

Adjusting entry at the end ofaccounting period

Expenses xxxPetty cash fund xxx

Reversing entry at the start of

accounting period

Petty cash fund xxx

Expenses xxx

Increase in fund Petty cash fund xxxCash in bank xxx

Decrease in fund Cash in Bank xxxPetty cash fund xxx



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Cash shortage Expenses xxxCash over and short xxx

Cash in bank xxx

Receivable from petty cashier/ xxx

Loss from cash shortageCash over and short xxx

Cash overage Expenses xxxCash over and short xxxCash in bank xxx

Cash over and short xxxPayable to Petty cashier/Miscellaneous income xxx

BANK RECONCILIATION STATEMENT

Bank Reconciliation Statement - is a statement the company prepares to reconcile thedifference between the cash balance shown on the ban statement and the cashbalance on the company’s books.

Bank Statement - is a statement issued (usually monthly) by a bank describing theactivities in a depositor’s checking account during the period.

Debit Memo – is a form used by bank to explain deduction from the depositor’s account.

Credit Memo - is a form used by bank to exp lain addition to the depositor’s account.

Reconciling Items

1. Deposit in transit – a day’s cash receipts recorded in the depositor’s books in oneperiod but recorded as a deposit by the bank in the succeeding period.

2. Outstanding checks – are checks issued by a depositor that has not beenpresented to the bank for payment.

3. Service charges – are amounts deducted by the bank to cover the cost ofhandling the checking account.

4. NSF check – is a customer’s check returned from the bank because thecustomer’s checking account balance was insufficient to cover the check.

5. Notes collected by bank – proceeds of note collected by the bank for thedepositor.

6. Book errors

7. Bank errors



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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 depositcolumn 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 checkcolumn 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 Entries1. 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 CompanyBank Reconciliation Statement

December 31, 20xx

Balance per book/ledger Pxxx Add: Bank credit memos Pxxx

Book errors xxx xxxSub-total xxxLess: Bank debit memos xxx

Book errors xxx xxxAdjusted cash balance Pxxx

Balance per bank Pxxx Add: Deposits in transit Pxxx

Bank errors xxx xxxSub-total xxxLess: Outstanding checks xxx

Bank errors xxx xxxAdjusted cash balance Pxxx



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Pro-forma Entries – Adjusting Entries

NSF check Accounts receivable xxxCash in bank xxx

Bank service fees/charge Miscellaneous expense xxxCash in bank xxx

Payment of bank loanwith interest expense

Notes/Loans Payable xxxInterest expense xxx

Cash in bank xxx

Collection of notesreceivable

Cash in bank xxxNotes receivable xxxInterest income xxx

Proceeds of bank loan Cash in bank xxxNotes/Loans Payable xxx

Documents

ACTBAS2 Cash Control