Cashbox the total money in the cashbox is restored to

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cashbox, the total money in the cashbox is restored to its original amount. The fund is now ready for a new cycle of petty cash payments. Point: Petty cash receipts with either no signature or a forged signature usually indicate misuse of petty cash. Companies respond with surprise petty cash counts for verification. Illustrating a Petty Cash Fund To illustrate, assume Z-Mart establishes a petty cash fund on November 1 and designates one of its office employees as the petty cashier. A $75 check is drawn, cashed, and the proceeds given to the petty cashier. The entry to record the setup of this petty cash fund is Nov. 1 Petty Cash 75 Cash 75 Establish a petty cash fund. Assets+75−75=Liabilities+Equity Assets=Liabilities+Equity+75−75 After the petty cash fund is established, the Petty Cash account is not debited or credited again unless the amount of the fund is changed. Point: Although individual petty cash disbursements are not evidenced by a check, the initial petty cash fund is evidenced by a check, and later petty cash expenditures are evidenced by a check to replenish them in total. Next, assume that Z-Mart’s petty cashier makes several November payments from petty cash. Each person who receives payment is required to sign a receipt. On November 27, after making a $46.50 cash payment for tile cleaning, only $3.70 cash remains in the fund. The petty cashier then summarizes and totals the petty cash receipts as shown in Exhibit 6.3 . EXHIBIT 6.3 Petty Cash Payments Report
Z-MART Petty Cash Payments Report Miscellaneous Expense 1. Nov. 27Tile cleaning 2. $46.50 Merchandise Inventory (transportation-in) 1. Nov. 5Transport of merchandise purchased 2. 15.05 Delivery Expense 1. Nov. 18Customer’s package delivered 2. 5.00 Office Supplies Expense 1. Nov. 15Purchase of office supplies immediately used 2. 4.75 Total $71. 30 Point: This report can also include receipt number and names of those who approved and received cash payment (see Need-To-Know 6-3 ). Page 289 The petty cash payments report and all receipts are given to the company cashier in exchange for a $71.30 check to reimburse the fund. The petty cashier cashes the check and puts the $71.30 cash in the petty cashbox. The company records this reimbursement as follows. Nov. 27 Miscellaneous Expenses 46.50 Merchandise Inventory 15.05 Delivery Expense 5.00 Office Supplies Expense 4.75 Cash* 71.30 Reimburse petty cash. *$75 fund bal. $3.70 cash remaining. Assets−71.30+15.05=Liabilities + Equity −46.50 − 5.00 − 4.75 Assets=Liabilities + Equity−71.30 −46.5 0+15.05 − 5.00 − 4.75 A petty cash fund is usually reimbursed at the end of an accounting period so that expenses are recorded in the proper period, even if the fund is not low on money. If the fund is not reimbursed at the end of a period, the financial statements would show both an overstated cash asset and understated expenses (or assets) that were paid out of petty cash. Some
companies do not reimburse the petty cash fund at the end of each period if this amount is immaterial to users of financial statements.

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