The Petty Cash System

Every business makes small purchases each day for items such as office supplies, stamps,
shipping charges, and other miscellaneous items. Writing a check for such items is time-
consuming and expensive. Establishing a petty cash fund allows a business owner to maintain
control and account for the expenditures with minimal cost and administrative hassle.

The Petty Cash is usually administered by the Administrative Assistant. The petty cash is
stored in a lock box and kept by the Admin Assistant. Records are kept by way of petty cash
vouchers and a petty cash transaction log. There are usually rules to the management of the
petty cash. Some rules are:

✓ The monthly petty cash amount is fixed

✓ No one payment should exceed $3,000.00.
✓ Loans to staff attract 10% interest.
✓ The office assistant signs for all transactions done by her on behalf of the company.
✓ A petty cash voucher must be filled out and signed for all transaction.
✓ All transactions must be entered in the Petty Cash Log Book
✓ Petty cash reconciliation must be done before next reimbursement
✓ Petty cash must be reimbursed when at least $3,000.00 remains. (if it reaches that
amount before the end of the month.)

Example:

On March 1st 2015 $12,000.00 (the fixed amount) was paid into petty cash. The Petty Cash was
nil at the time. Throughout the month petty cash payments were as follows:

March 3rd 2015 Cleaning supplies $1,120.63

March 6th 2015 Lunch for Director $950.00
March 9 2015
th Stamps $600.00
March 15th 2015 Loan to Judy White for taxi fare $1,200.00
March 20th 2015 Snacks for staff meeting $2,876.25
March 22nd 2015 Cost for manager’s cheques $1,520.00
March 26th 2015 Repayment of loan by Judy White 1,320.00
**Admin Asst - Marie Bradford
Office Assistant - Karen Clarke
PETTY CASH LOG BOOK
DATE PAID TO TRANSACTION AMOUNT
BALANCE
March 3rd 2015 Karen Clarke Cleaning Supplies $1,120.63 $10,879.37
March 6th 2015 Karen Clarke Lunch for director $950.00 $9,929.37
March 9th 2015 Karen Clarke Stamps $600.00 $9,329.37
March 15 2015 Judy White
th Loan for taxi fare $1,200.00 $8,129.37
March 20th 2015 Karen Clarke Snacks for meeting $2,876.25 $5,253.12
March 22nd 2015 Karen Clarke Manager’s cheques fee $1,520.00 $3,733.12
March 26 2015 Judy White
th Loan repayment $1,320.00 $5,053.12
On April 3rd the Petty Cash was reimbursed in the amount: $12,000 - $5,053.12 = $6,946.88

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 PETTY CASH RECONCILIATION

Opening Balance as per records $12,000.00

Less: Vouchers ($8,266.88)

Add: Loan Repayment $1,320.00

Closing Balance $5,053.12

Cash on hand 2 x 1,000.00 $2,000.00

3 x 500 $1,500.00
8 x 100 $800.00
8 x 50 $400.00
12 x 20.00 $240.00
7 x 10.00 $70.00
6 x 5.00 $30.00
13 x 1.00 $13.00
12 x .01 $0.12
$5,053.12 $5,053.12

Preparation Of Money For Banking

Cash

As you are no doubt aware, cash consists of notes and coins.

Jamaican notes are made of denominations of $5,000 $1,000 $500 $100 $50

When preparing the cash for banking the notes are batched. The process for this is:

✓ Sort notes into the same denomination with the transparent window in the bottom
right-hand corner
✓ Bundle each denomination into groups of ten and secure the flat with an elastic band.
✓ Each flat is then grouped into batches of ten flats known as a bundle and secured with
two elastic bands

The value of damaged notes is as follows:

☺ If two-thirds of a note is present, it can be counted at full value.
☺ Half a banknote has half the face value.
☺ Less than half a note has no value at all.

Coins are made up of $20 $10 $5 $1 25c 10c

✓ Coin is batched into plastic bags in the quantity marked on the bag. Another method
of batching coin is to use brown paper and roll the coins. There is quite a skill involved
in this method and most people opt for the recyclable plastic bag method.

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 Use a cash analysis slip to help count the cash, then enter the information on the
cash summary of the bank deposit.

Date: 23 April 2015

Notes Quantity Value
$5,000 9 $45,000
$1,000 24 $24,000
$500 30 $15,000
$100 56 $5,600

Coins
$20 80 $1,600
$10 52 $520
$5 29 $145
$1 143 $143
25cents 36 $9
10 cents 25 $3
TOTAL: $92,020

Cheques

A cheque is an unconditional order in writing addressed to a bank, requiring the bank to

pay on demand a certain sum in money. However cheques are not legal tender in the way
that cash is. This means that you can refuse to accept cheque payment and insist on cash
if you wish. Businesses can decide whether they will accept cheques from their customers.
If you have ever tried to use a personal cheque in a shop you will know that many retailers
do not accept them, preferring cash or credit cards where payment is guaranteed.

There are three parties to a cheque:

drawer – the person who writes the cheque

drawee – the bank holding the drawer’s bank account
payee – the person (or organisation) the cheque is written out to

All cheques received by your organisation should be checked prior to banking to ensure
they are accurate and valid and will not be dishonoured (returned unpaid) by the bank as
follows:

✓ The date is not post-dated (dated ahead of today’s date).

✓ The cheque is not stale (dated more than 6 months ago).
✓ The cheque is signed.
✓ The payee is correct. If another name appears next to ‘Pay’, there should be an endorsement
on the back of the cheque, signing the cheque over to the organisation.
✓ The amount in words and the amount in figures agree.
✓ Any alterations are signed by the drawer of the cheque.

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 Crossing cheques

For security purposes the words ‘NOT NEGOTIABLE’ written across a cheque ensures that
only the Payee can receive the money.

Cheques that are to be deposited in the organisation’s account should have ‘Not
Negotiable’ either written or stamped across them before depositing. This may be done by
another member of staff upon opening the mail and finding cheques for payment of
accounts that have not been ‘crossed’.

Cheques made out to CASH should not have ‘Not Negotiable’ written across them as this
will prevent them being cashed. Generally most cheque books for organisations have ‘Not
Negotiable’ pre-printed on them. In this case the signatory of the cheque can turn the
cheque over and write on the back of the cheque ‘Please pay cash’ and sign this.

Money orders

This is a no hassle alternative to using cheques and bank cheques and usually more affordable
than a bank cheque. They are a convenient and safe way to pay your bills, transfer money or
send amounts overseas. Customers often use this method to pay their bills.

Money orders are banked in exactly the same way cheques are banked.

Once the cheques and money orders have been validated (checked for errors) they are written
up in the deposit book.

Electronic banking

Many organisations now pay accounts using electronic banking facilities. Organisations submit
data containing payment instructions on diskette or by secure modem transfer to their bank.
The bank processes the data. Files are then presented to other financial institutions (usually
during the night) and cleared funds are available in the recipient’s account the next day.

This is a fast, efficient and inexpensive way for a computerised organisation to pay accounts.

Many banks have a system of telephone banking for their customers, allowing them to pay
accounts and transfer funds from one account to another by telephone. Some banks now have
Internet services. These services allow people to transfer funds between accounts, pay regular
accounts to certain institutions, review transactions and order statements from their home
computer.

Night safe

Banks provide a night safe service for use by customers. Deposits are prepared in the normal
way and placed in the safe outside the bank building. Most banks close at 2:30 pm Monday to
Thursday and 4:00 pm on Friday. By using the night safe an organisation can prepare the bank

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deposit at the close of training. This practice removes all funds from the premises overnight,
reducing possible loss in the event of robbery or some other disaster.

Bank staff will process the deposit on the next working day.

Cash, cheques and credit cards are listed in banking forms in accordance with the banking
institution’s guidelines

All banks produce their own deposit forms or slips. These are often encoded (printed) with the
customer’s name and account number, as well as the Bank and Branch and BSB (Bank, State,
Branch) number. The size of the book is determined by the number of cheques the business is
likely to deposit within a reasonable time period. Most business deposit books are designed so
that a duplicate (carbon) copy of the deposit is left in the book. Smaller businesses will have a
deposit book with a butt (similar to a cheque book) which is the organisation’s record of the
deposit.

While each bank’s deposit slip looks slightly different, each requires the following information:

☺ Name of the bank, the branch and the Account number.

☺ Name of the depositor/account holder and the account number.
☺ Date of deposit.
☺ Total of coin/notes/cash.
☺ A listing of the cheques showing bank and cheque number.
☺ Total number of cheques.
☺ Total value of the deposit (cash and cheque transactions).
☺ Signature of the person depositing/preparing the deposit slip.
☺ Space for the teller’s signature, the number of cheques and other information for bank use
only.

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Making Cheque payments

As we have already discussed; a cheque is a form with pre-printed details of your bank
account, on which you write a person’s or organisation’s name and an amount of money that
you want to pay them. You must also date and sign the cheque. When the cheque is
presented to the bank, the money is deducted from your bank account and paid to the person
or organisation named on the cheque.

Cheques are numbered consecutively and are issued by the bank either in a cheque book or in
single pages. Company cheques can only be signed by a member of staff who is authorised to
spend the company’s money. It is often company policy that the signatures of two members
of staff are required on a cheque to ensure that one person cannot write cheques to take
money out of the company account without the knowledge of other staff.

The cheque butt on the left side of the cheque is your record of your purchase and your
account balance. You should keep these cheque stub records up to date, so that the
information can be used as a quick reference as to the organisation’s bank balance.

The cheque stub shows:

✓ The date you write the cheque

✓ The payee’s name
✓ A brief description of the payment
✓ The balance after the last cheque was written
✓ Any money deposited in the account since the last cheque was written
✓ The amount of the cheque you are writing
✓ The balance after the amount of the cheque is deducted

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 Bank Cheque

1. Date - the date the check is written (cannot be a future date);

2. Maker - person/business who writes the check - the name will be printed on the check;
3. Payee - person/business to whom the check is written;
4. Signature line or lines - two or more signatures can be required on a check;
5. Written amount - the amount written in numbers;
6. Legal amount - the amount written in words;
7. Check number - which is printed on the check and appears in the MICR line on the
bottom of the check;
8. Banking information - both the name of the bank and the American Banking
Association number appear on the check;
9. Account and routing numbers - appear on the bottom of the check in MICR line. The
routing (ABA) number is always 9 digits long, and is always between a line and a
colon(|:xxxxxxxxx|:).

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 Invoices

An invoice is a bill, or a request for payment, for a sale. It lists goods or services provided by
the seller to the customer, along with prices, credits, discounts, taxes and total due. It may
also include credit information, an invoice number, a salesperson’s name and any special
sales programs. For example, many invoices allow the buyer 30 days to pay and offer a
discount for paying within the first 10 days of the invoice date. An invoice includes business
contact information for the seller, including business name, address, phone number, fax
number and web address. It also includes contact information for the buyer and the date of
the sales transaction. Invoices should not be confused with purchase orders, which are
written requests from buyers to sellers authorizing the shipment or delivery of goods with
agreement to pay.

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 Receipts

A receipt is documentation that payment has been made to finalize a sale. It serves as proof
of ownership in most cases. It lists goods or services, prices, credits, discount, taxes, total
amount paid and method of payment. Receipts generally include information about buyers
and sellers, in different formats and to varying degrees. For example, point of sale purchases,
such as buying gas for a car at a gas station, have complete seller’s contact information but
limited buyer’s information. A receipt is the buyer’s proof of payment.

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 STOCK TAKING
Stocktake Procedures
Stocktake depends on efficiency in the daily routine, such as housekeeping, accurate use of retail
equipment, and correctly completed documentation. Accurate stock records depend on accuracy
every day.
All staff members are expected to participate in stocktake.
Preparation for stocktaking:
· Staff will be notified of cut off dates for order deliveries, and shelf filling cut off time.
· All stock records must be brought up to date.
· Ensure that all stock items have a ticket with the correct information.
· New staff members must be advised of stocktake procedures.
· All customer special orders must be completed.
· Goods on loan must be retrieved.
· Floor plan prepared with fixture numbers for shop and the reserve.
· Numbered stock sheets allocated to each area.
· Stock lists prepared.

Procedures on stocktake day:

· Every item of stock must be counted.
· The stock count is then written on the numbered sheet.
· All stock sheets must be added and extended accurately.
· All checks made the previous day must be maintained.
· Check that all documentation is completed prior to stock take.
· At least 10 per cent of the counts should be spot checked to ensure accuracy in counting.
· Once finalised, the stock sheets must be signed off and verified.

Reordering Stock
Sufficient stock must be on hand to supply customer’s needs but MegaMax does not have the
resources to store large quantities of stock. Minimum stock levels should be checked regularly
to maintain an adequate supply.
Stock may only be reordered by authorised staff using MegaMax ordering systems. If you are
not authorised to reorder stock, speak to your manager if stock levels are running low.
Sometimes stock that has been ordered does not arrive as expected.
What to do when this happens: -
1. Find out why this has happened. Check the invoice and phone the supplier if necessary.
2. Notify staff members of the reason for the delay so they can inform customers when
necessary.
3. Place a ‘Temporarily Unavailable’ ticket on the shelf, if appropriate.

Dispatching Goods
All goods that need to be sent back to the supplier must be done according to store
procedure.
1. Identify the reason for the returns – damage, soiled, oversupply, incorrect goods.
2. Package goods carefully so as to avoid damage in transit.
3. Complete a credit request form.
4. Check that the documentation has been completed accurately – name, address, reason for
return, pricing, and special delivery instructions.
5. Goods for dispatch must be held in the designated area of the reserve.
This will ensure they are returned and processed promptly.

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Stock Rotation
All employees must follow the FIFO system of stock rotation.
FIFO = First In First Out
That means the goods that are first into the store must also be the first to go out of the store with
the customer. Check all dates before you put stock onto the fixtures.
Customers can’t buy merchandise from the reserve, so the fixtures mustbe filled regularly.

Stocktake is the actual counting of every item

of stock in the store. These figures are then
compared to the store's 'book stock' records to
show a store's gross profit. Book stock is a
record of stock kept on the company's books.
These days, many stores would keep electronic
stock records.

Stocktake figures are also used to:

• Determine the total dollar value of a brand or a Department or Store.
• Identify slow sellers and best sellers in a product range.
• Provide figures for profit and loss statements.
Therefore it is important that all records are accurate.

Other types of stocktake include:

• Full stocktake - Every item of stock in the store is counted yearly or half-yearly.
• Cyclical stocktake -Part of a store's stock is counted regularly. For example, perishable foods
may be counted weekly.
• Spot check - Stock in a specific area may be checked because of a discrepancy in the figures.

Example of Stocktaking; Ten tubby teddies

This story illustrates the importance of accurate stock records in a retail store.
This is more than just a story about annual stocktake. It also demonstrates how stocktake depends on
efficiency in our daily routine, such as housekeeping, accurate use of retail equipment, and correct
documentation. Let's follow the Teddies' journey from the MegaMax receiving bay to the Toy
Department. The mishaps in this story actually happen in real stores.

Ten Tubby When they arrive in

Teddies are $20 the store they are
each. Value = recorded in a stock
$200 record book

In time, when … and the stock

they've all been records should
sold the figures balance.
will go to the
office…

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But this will only happen if the Ten Tubby Teddies have been cared for correctly and the sales have
been processed accurately.

Now, let's have a look at what actually happened.

When Tubby Teddy number one was sold,

the sales assistant accidentally pressed
$2.00 on the cash register instead of
$20.00. This sale was not recorded
accurately.

Tubby Teddy number two became very dirty because

everyone was too busy to dust the shelf. The sales
assistant reduced the sale to $5 but forgot to record
the markdown in the book

This sales assistant has lost another $15

for the Toy Department. Click on the
scales to see what happens to the balance
of the stock received and the recorded
sales now.

Tubby Teddy number three got lost in the Advertising

Department. No-one remembered that it was taken
there to be photographed for the catalogue, so it
wasn't counted at stocktake.

Another $20 sale has been lost for the Toy

Department. Click on the scales to see
what happens to the balance now.

The other seven Tubby Teddies were all

sold and their sales recorded accurately.

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 But, by the time stocktake came around the damage
had been done.

Preventing discrepancies at stocktake

What could you do to prevent discrepancies at stocktake, like the one you've just seen with the Tubby
Teddies? Here are suggestions to ensure stock records are documented accurately.

Question; The sale of Tubby Teddy number one was registered as

$2 instead of $20. How could the sales records have been
corrected?

Answer; Cancel the incorrect sales transaction according to store

procedures then process the sale at the correct price

Question; The price of Tubby Teddy number two was reduced

because it had become damaged. How would you record this
transaction?

Answer; Record this transaction in the Markdown Book

Question; Tubby Teddy number three was loaned to the

Advertising Department. How could you keep track of stock on
loan?

Answer; Record loans to other departments in a book, or

electronically.

Electronic stock recording equipment

Stocktake can be done manually or electronically. Most stores use electronic

equipment for their stock records. Staff can order stock, keep track of
inventory, list prices, record markdowns, and record sales by this method.
Electronic stock recording equipment scans a barcode to register the item. The
quantity and price are entered by the user.

Electronic equipment relies on the use of barcodes. Barcodes are a

coding system used in the retail industry to identify a range of items such
as products and cartons. In fact, barcodes can be used to identify any
item that needs to be tracked

Preparation for stocktake

The following stocktaking principles apply to all stores whether the stores use electronic
equipment, or not;
• Stock records must be accurate.
• Stock must be counted.

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