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Accounting for cash

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Imprest system

CASH strongly recommends that voluntary sector organisations adopt the imprest system for administering petty cash.

The system that many organisations use is to withdraw money from the bank and keep it in a Petty Cash box. As and when necessary payments are made until the fund is run down. Some more money is then withdrawn from the bank.

This method is adequate, but it is difficult to know exactly how much money should be in the Petty Cash fund at any one time.

And it’s easy to become too relaxed about accounting, particularly when it comes to filling in the Petty Cash Book and keeping a proper filing system for Petty Cash vouchers.

The imprest system, by using a tightly controlled float of a specified sum, makes accounting far easier and mistakes less likely. But it needs to be backed up with a strong set of rules.

Here is a seven step guide to running an imprest system.

Step one

Decide on the appropriate amount for your float – say £100 – and withdraw that sum from the bank by cashing a cheque. The cheque details should be entered in the Bank Analysis Book in a column called “Petty Cash”.

Step two

Put the cash in your Petty Cash box and enter it in your Petty Cash Book on the receipts side. You can buy a Petty Cash Book from stationers. Alternatively, you can use a page in your Bank Analysis Book. Petty Cash should be kept in a lockable cash box. Only one person should operate the Petty Cash system at any one time, and they are the only person who should have access to the box. When the Petty Cash system is handed over from one person to another, it should be done in front of a witness and the amount of cash and the amounts for vouchers should be written up in the Petty Cash Book.

Step three

Any money paid out should be replaced with a Petty Cash voucher made out to that amount. The voucher should be placed in your Petty Cash box. There should then always be £100 worth of cash and Petty Cash vouchers in the box. Receipts should always be obtained for Petty Cash claims, and the receipts should be stapled to Petty Cash vouchers. Pads of Petty Cash vouchers are available from stationers. Of course, with the best will in the world, receipts are not always available. In this instance an explanation as to why a receipt isn’t available should be written on the back of the Petty Cash voucher. All Petty Cash vouchers should be signed and then authorised by someone else. The person making the claim should never be the person that authorises it!

Step four

Top-up the float when you are likely to be near the point of exhausting your Petty Cash fund. In your Petty Cash Book record details of payments. The total of these payments is the amount that you withdraw from the bank to restore your float to £100. If, for example, your payments come to £76.91, there should be £23.09 in your Petty Cash box. All you have to do is withdraw £76.91 to restore your float to £100.

Step five

The Petty Cash Book should be written up on a regular basis, ideally every time you draw more money from the bank for your Petty Cash fund. For large Petty Cash funds you should write up the book on a more frequently – this should make you question whether to hold large sums as Petty Cash.

Step six

Petty Cash vouchers, with receipts, should be filed in date order. It helps to number the vouchers and put a corresponding number against that item of expenditure in the Petty Cash Book. It is important that vouchers and kept as they will be needed when you prepare your accounts.

Step seven

For the purpose of accounts, on the last day of the financial year the Petty Cash should be counted in front of a witness and a signed certificate for that amount should be made out or the Petty Cash Book should be signed.

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Last updated: Mon, Mar 31 2008 - 02:07:29 PM

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