Petty cash is any physical box or pocket where cash can be accumulated. Every discrepancy must be explained, and measures must be taken to prevent it from happening again.
Adjustments are possible (overpayments, missing a few dollars, etc.), but they must remain exceptional and not significant.
- Recommendations related to the management of a cash register
- Accounting transcription of cash transactions
- Checking the cash balance and adjusting it
- The case of a negative cash balance
1. Recommendations related to the management of a cash register
We advise you to regularly keep a record of your petty cash.
This record must include all cash transactions, in electronic or paper format.
Each cash transaction must be recorded on the day it is made. Cash receipts are distinguished from cash disbursements by the use of two different columns.
2. Accounting transcription of cash transactions
The regularity of the entry can be adapted according to the usefulness of the cash desk.
Let's take an example.
I have 2 cash registers in my association - I, therefore, have two “Petty cash” accounts on Springly:
- The reception petty cash: for memberships
- The refreshment petty cash: for the weekly games with the sale of drinks & snacks
For the reception cash desk
These are important amounts that require a detailed follow-up. You need to have the details of the paid memberships by the member in order to have a precise follow-up by a person.
This cash register is also used for small purchases. You may note all the outgoings so that I can take it back when you enter the purchase/invoice in Springly.
Cash Remittance
From time to time, you may put some cash back in the bank to empty it. You will still leave a small amount in the cash register to be able to give change. You record the remittance on Springly from Accounting > Book Entry → Cash Deposit/Withdrawal
For the cash register
The cash register is used for small sales (Drinks & Snacks) during events.
To simplify the management, a manual count could be done at the end of each event (e.g. Sunday after the game). Thus, one counts the receipts only after the event in its cash book and in Springly.
Bank Remittance
As for the Welcome desk, you put some cash from time to time in the bank to empty it. You still leave a small amount in the bottom of the cash register to be able to give the change.
Withdrawal from Bank
For bigger events (e.g. tournaments), you may need more cash. In this case, you can make a cash withdrawal from the bank, which you note in the account and on Springly.
3. Checking the cash balance and adjusting it
You must ensure that your record is perfectly maintained, by making regular checks.
At the close of an event, every day, week, or month the cash register should be checked by a manual count.
The cash balance is checked by reconciling:
- The theoretical balance (opening balance + receipts - disbursements)
- The real balance is obtained from a physical count
If the cash book and the accounting are kept rigorously, you should have
Theoretical balance (cash book or notebook)
= Accounting in Springly
= Actual balance of the petty cash box
In case of discrepancies, it is imperative to :
- quickly find its origin (e.g.: cash register error, theft, etc.)
- rectify it (e.g.: record purchases paid with cash from a cash desk, record forgotten bank deposits or withdrawals, etc.)
If you don't have an explanation, you can make a cash adjustment in advanced entry, via the profit and loss accounts.
Ex. If I have $5 more on my Drinks & Snacks cash register than in accounting, I pass:
Ex. If I have $0.50 less on my Home cashier than in accounting, I pass:
4. Negative Cash
You can't have a negative cash flow. In real life, when there are no funds in your physical cash register, you cannot withdraw any more from the cash register.
The cash balance is always negative or zero.
In fact, a negative balance means that there is more money going out than coming in.
In order to obtain this debit balance, the cash register is :
- Debit the amount of cash received from sales;
- Credited by the amount of money disbursed, used for purchases or bank deposits.
Why is the cash balance always in debt?
The cash balance is increased by the amount of cash received (e.g.: sales at the refreshment stand)
It is decreased by the amount of cash disbursed (e.x.: sandwiches paid with money from the cash register for the volunteers who run the stand).
Often, a negative balance indicates a cash flow error. However, in some cases, the difference is due to theft. A daily control gives the possibility to detect these errors immediately and correct them.
Conclusion
If you have a lot of expenses paid in cash, open a cash book (like a daily diary) in which you record:
- the initial cash balance
- the cash outflows
- cash receipts
- the final balance day by day
This will allow you to quickly check at any time the theoretical cash balance mentioned in this booklet, the actual cash balance, and at the end of each month/year, the accounting balance of the cash account.
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