Making Payments from Petty Cash

Making Payments from Petty Cash - The custodian keeps the...

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Making Payments from Petty Cash The custodian of the petty cash fund has the authority to make payments from the fund that conform to prescribed management policies. Usually management limits the size of expenditures that come from petty cash and does not permit use of the fund for certain types of transactions (such as making short-term loans to employees). Helpful Hint From the standpoint of internal control, the receipt satisfies two principles: 1. establishing responsibility (signature of custodian), and 2. documentation procedures. Each payment from the fund must be documented on a prenumbered petty cash receipt (or petty cash voucher). The signatures of both the custodian and the individual receiving payment are required on the receipt. If other supporting documents such as a freight bill or invoice are available, they should be attached to the petty cash receipt.
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Unformatted text preview: The custodian keeps the receipts in the petty cash box until the fund is replenished . As a result, the sum of the petty cash receipts and money in the fund should equal the established total at all times. This means that management can make surprise counts at any time by an independent person, such as an internal auditor, to determine the correctness of the fund. The company does not make an accounting entry to record a payment at the time it is taken from petty cash. It is considered both inexpedient and unnecessary to do so. Instead, the company recognizes the accounting effects of each payment when the fund is replenished. Replenishing the Petty Cash Fund Helpful Hint Replenishing involves three internal control procedures: segregation of duties, documentation procedures, and independent internal verification....
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Making Payments from Petty Cash - The custodian keeps the...

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