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Accounting for cash

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The handling of cash and Petty Cash often causes organisations considerable headaches. The golden rule is that where possible it is better to pay by cheque to keep cash handling to a minimum. That said, many organisations have no choice but to keep cash readily available to pay for small expenses; typically for office supplies like stamps and for expenses for volunteers.

It is a mistake to believe that because the sums involved in Petty Cash accounting are frequently small, Petty Cash is less in need of thoroughness than other accounting practice. All money that a voluntary sector organisation handles should be accounted for in a responsible way. Funders, clients and the wider public expect and deserve nothing less.

This factsheet covers the main areas of cash accounting, and focuses on Petty Cash. This includes:

  • The distinction between cash and Petty Cash
  • Tips for handling cash receipts
  • The Imprest System and Petty Cash rules
  • One-off events and separate floats and fee books

Note that CASHFACTS uses the term Bank Analysis Book instead of Cash Analysis Book. (See CASHFACTS: Basic Bookkeeping).

Handling cash

Confusion sometimes arises over the distinction between cash and Petty Cash:

  • Cash is money received in the form of coins and notes. It should be paid into the bank and recorded in the Bank Analysis Book in the same way as cheques.
  • Petty Cash is a float system which is used to pay small expenses. The Petty Cash Book is where these payments are recorded.
  • Note that the Petty Cash Book can be written up using a page in your Bank Analysis Book. It is important to keep cash received seperate from your Petty Cash float: if you mix the two you are courting disaster!
  • Don’t be tempted to put money received in your Petty Cash box and then make payments from it. How will you distinguish between money received and money drawn from the bank for your Petty Cash float?
  • Always pay money received straight into the bank, so that it appears in the Bank Analysis Book and on your bank statement.
  • Never make payments directly from cash received. Ideally no cash payments should be made other than through Petty Cash.

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Last updated: Mon, Mar 31 2008 - 02:06:11 PM

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