CHAPTER THREE: MANAGE STOCK LEVELS IN THE WORKPLACE

Stock; This refers to reserves of goods and various kinds of goods purchased for use or resale in
the business e. g spare parts, raw materials, consumable stock (stationery) Capital goods (fixed
assets e.g. Motor Vehicles, Computers) purchased or finished goods for resale.

STOCK RECORDS

Stock record shows the records of one line of stock showing the quantities received and issued
and the balance at hand.

PURPOSE OF THE STOCK RECORDS

- They show value of each transaction and the balance

- They show the quantities in stock, ordering levels, goods on order and goods issued
- They help in reporting on stock losses, wastage and inactive stocks

STOCK RECORD CARDS

This is a document that shows clearly the stock receipts, issues and quantity in stock at a specific
period of time.

CONTENTS OF A STOCK RECORD CARD

- Stock reference numbers

- Receipts
- Issues
- Balance in stock
- Maximum and minimum stock levels
- Re-order level
PURPOSES OF STOCK CONTROL

Equipment, resources and machinery for the factory and offices must be carefully controlled so
that they are always available in the stores when they are required. A stock control card is kept
for each item giving a record of receipts and issues together with the maximum, minimum and
recorder levels. Stocktaking takes place at regular intervals, when a physical check is made of all
items in stock.

MAXIMUM STOCK LEVEL

The maximum stock figure is the highest quantity of stock, which should be held at any time to
avoid overstocking. It ensures that capital is not tied in excessive amounts of stock, that valuable
store space is not used unnecessarily and that the stock will not deteriorate or become obsolete
while still in the storeroom.

MINIMUM STOCK LEVEL

The minimum stock figure is the lowest quantity which should be maintained to avoid stocks
from running out and in order to allow the buyer time to replenish the stock before the balance in
hand is used up; a re-order level is given to remind the buyer to place a further order.

RE-ORDER LEVEL

This is the level which stock should be re-ordered and determined as follows;

Daily usage x number of days for delivery + minimum stock level. For example; In the case
of the headed A4 bond paper, it is estimated that half a ream is used daily. Twenty days are
required for orders to be delivered and minimum stock level is 10. The re-order level is
therefore 1/2x 20+ 10=20

When the amount of stock has been reduced to the re-order level, the stock control clerk knows
that a further quantity of the item must be ordered. The clerk is guided in the amount of the order
as the total of the balance in stock and the new order must not exceed the maximum stock figure.

ADVANTAGES OF STOCK CONTROL

 An effective stock control system should enable a company to;

- Keep an accurate check on the quantities of stock issued

- Ensure that production is not stocked as this would happen if the stores run out of stock
- Avoid deterioration or goods becoming obsolete

STOCK RECORD CARD

Maximum Level: 50

Re-order Level: 20

ITEM/PRODUCT: 80G Bond Paper – Code 0027 Minimum Level: 15

DATE RECEIPTS ISSUES BALA ON ORDER

NCE

Quantity Inv Quanti Requi Dept Balance Date Quan Order Date
. ty sition in ordered tity No. Rec.
No No. Stock
.
01/01/ 25 04/01/04 30 A123 14/01/04
04

3 141 P. White 22
03/01/
04
2 159 Factory 20

05/01/
04 2 163 Typing 18

08/01/ 30 32 50
04 Reams

Duties of the storekeeper

- Responsible for checking every delivery to ensure that the merchandise is received in good
condition and on the right quantity ordered and also all the merchandised ordered is received
and delivered to the store room.
- Keep a record of all the items received, stored and issued from the stock.
- Orders materials when stock is low
- Ensures that the stock of any items does not become too excessive.
Receipt of Goods

When receiving goods into stock, the stock control clerk should ensure that they are supplied in
accordance with the order and that the goods quality or merchantable quality is fit for the
purpose they are intended for and that they correspond with the description
Office Stationery

Stationery refers to all working materials in the office e.g. staplers and staples, hole punches,
adhesive tape, paper clips and pins, rubber bands, scissors, typing papers, carbon paper, ink
cartridges, printer ribbons etc.

In a small firm, the secretary or her assistant may be responsible for issuing stationery. As stock
cost money and storage space in cupboards is always valuable in an office, it is important to
avoid unnecessary stockpiling of paper. A method of avoiding stockpiling is to keep a careful
record of everything in the stationery store on a stationery stock card.

Key factors for the efficient organization of stationery control

- Appoint one person to be in charge of issuing and ordering stationery.

- Allocate a central store room for housing stationery supplies.
- Adopt a FIFO (First in, First out) system for issuing stock to avoid deterioration
- Check that every issue of stock is covered by a requisition, authorized by a supervisor.
- Enter every issue and receipt on stock control card, keeping a watchful eye on stock levels.

The stationery stock card shows the minimum stock level, a figure which the stock should not
fall below, and the maximum stock level a figure which the stock must not exceed. This should
not be exceeded, otherwise money will be tied up and storage space will be used up unnecessary.

Maximum and minimum levels enable the secretary or clerk in charge of stationary stock must
see at a glance from the stock card whether issues of certain items are increasing or decreasing.
Stock cards also enable the recording to be done well before stock falls too low. In the card
illustrated the person in charge should never allow the number of boxes of paper clips to fall
below 15, but she should never stock up to give a total of more than 50. The right hand column
keeps a record of the number in stock and when these fell to 21, she has to re-order.

STOCK REQUISITION
Stationery is ordered by staff on a stores requisition form. It is useful to have a checklist of all
the items in the stationery store attached to the outside of the door, and circulated round to all
staff likely to be ordering the stationery so that the requisition forms for ordering stationery can
be completed from it.

REQUISITION FORM

This is a document originating from a particular department requesting specified items. It shows
the date, quantity needed and the stock description.

SAMPLE OF A STATIONERY REQUISITION FORM

The typing pool wishes to be issued with the following items of stationery

- 4 reams plain paper A4 size

- 20 boxes of duplicating papers, 5 pink, 10 green,5 yellow
- 6 ribbons
FURNWORLD (PRIVATE) LIMITED

Date: 12/12/03

Department: Administration Requisition No: 173

Description of Items Requested Quantity

Reams of plain paper A4 size 4 Reams

20 boxes of duplicating papers 5 pink

10 green

5 yellow
 Ribbons 6

Signature of Head of Department: …………………… Date: ………………….

Authorized by: …………………………………………. Date: ………………….

Retail supply chain

Stock management in the retail supply chain follows the following sequence:
 Request for new stock from stores to head office
 Head office issues purchase orders to the vendor
 Vendor ships the goods
 Warehouse receives the goods
 Warehouse stocks and distributes to the stores
 Stores receive the goods
 Goods are sold to customers at the stores
The management of the inventory in the supply chain involves managing the physical quantities
as well as the costing of the goods as it flows through the supply chain. In managing the cost
prices of the goods throughout the supply chain, several costing methods are employed namely:
AVCO (Average Cost Price method)
FIFO (First In First Out) method
LIFO (Last In First Out) method
3.1 PURCHASE AND SALE OF GOODS

CONTENT

 Identify the principal documents used in the purchase and sale of goods.
  Describe the flow of these documents in a business transaction.
 Complete orders and invoices from information provided, which may include simple
calculations and percentages.
 Differentiate between trade and cash discounts

The complete process of supplying goods and services from ordering to payment is called a
transaction. A variety of documents are raised at various stages in the process of buying and
selling (between the buyer and the seller). Business ensures that there is no confusion about what
has taken place between the buyer and seller and to provide a record or proof of that activity at a
later date.

Trading Documents between a buyer and a seller

Business Documents from the Buyer Business documents from the seller

Enquiry Quotation

Order Acknowledgement

Cheque Advice Note

Delivery Note

Invoice

Statement of Account

The sequence of buying and selling documents

1. Enquiry,
2. Quotation,
3. Order,
4. Acknowledgement,
5. Advice Note,
6. Delivery Note,
7. Invoice,
8. Statement of Account.

1. Enquiry – the enquiry may be a letter or a standard form that is sent by the buyer to one or
several firms seeking information about products or services available. The buyer may invite any
number of suppliers to tender, or make an offer to supply. Based on the information received in
response to the enquiry, the buyer will decide who to purchase from.

2. Quotation – the quotation may take the form of a standard printed, a catalogue or price list. A
price list indicate the product and price of the product. A catalogue differs with a price list in that
it shows the picture of the product and the price. The quotation may also contain: Delivery
period – how long before delivery (or dispatch) can be executed.

Discount offered – Cash Discount – offered by seller to encourage prompt payment by buyer, it
is deducted when the customer pays within the specified time. Trade discount – given to traders
by the seller, trade discount is deducted by the seller when he/she makes out the invoice and is
not affected when the customer pays.

Carriage arrangements- price including or excluding transport costs

3. Order

In business or commerce, an order is a stated intention, either spoken or written, to engage in a

commercial transaction for specific products or services. From a buyer's point of view it
expresses the intention to buy and is called a purchase order. From a seller's point of view it
expresses the intention to sell and is referred to as a sales order. When the purchase order of the
buyer and the sales order of the seller agree, the orders become a contract between the buyer and
seller. The order will convey four pieces of information:

 Number and description of items required

 Price the buyer is expecting to pay
 When delivery is to be executed by
 Delivery address, which may be different form the address from where the order has
originated.

Spoken orders

Businesses such as retail stores, restaurants and filling stations conduct business with their
customers by accepting orders that are spoken or implied by the buyer's actions. Taking a
shopping cart of merchandise to a check-out counter is an implied intent to buy the merchandise.
Placing a take-out or eat-in order at a restaurant is a spoken purchase order. Putting gasoline in
one's tank at a filling station is an implied order. The seller usually expects immediate payment
by cash, check or credit card for these purchases, and the seller provides the buyer with a receipt
for the payment. In legal terms, this form of business order is an "implied in fact contract".

Steps in commercial orders

In commerce, various business documents are used to record the negotiation of an agreement to
buy and sell, record the agreement itself, and record compliance with the agreement and closure
of the contract. An agreement to buy and sell is a form of contract.

There are five basic requirements for a contract to exist between two parties: agreement,
voluntary, consideration, capacity, and legality. A sixth requirement of "in writing" sometimes
applies. The main concern for commercial orders is that there must be agreement (offer and
acceptance) for the order to be a contract. Prior to this, businesses often record the details of
negotiations by using a request for quotation, request for bid, sales quotation, or sales bid.
Quotations are non-binding and part of the negotiation process. A request for bid can be binding
or non-binding, depending on the terms of the bid. Once an agreement or contract is in place,
businesses record these as confirmed purchase orders and confirmed sales orders.

4. Acknowledgement- when the seller receives the order he will acknowledge receipt and
confirm that it has been received, that the goods can be supplied by the date they are required,
and that the prices stated on the order are acceptable.

5. Advice/Dispatch Note – is sent separate from the goods and its purpose is to advise the buyer
that the goods ordered have been despatched, and to mention the method of transport used. A
dispatch clerk is responsible for preparing the dispatch note.

6. Delivery note – is sent with the goods when the seller uses his own vehicles. The delivery
note indicates the quantity and nature of goods being supplied. The receiver of the goods must
sign the delivery note in duplicate and give the driver a copy of the signed delivery note to
indicate he/she have received the mentioned goods.

Goods Received Note (GRN) – is used to notify the internal department of the arrival of a
consignment and the condition of goods. It is prepared by the goods received section (Stores) to
Accounts Department for checking the invoice, stores for entering the goods received on the
stock record cards and to notify the buyer that the goods have arrived.

7. Invoice

An invoice or bill is a commercial document issued by a seller to the buyer, indicating the
products, quantities, and agreed prices for products or services the seller has provided the buyer.
An invoice indicates the buyer must pay the seller, according to the payment [Link] the
point of view of a seller, an invoice is a sales invoice. From the point of view of a buyer, an
invoice is a purchase invoice. The document indicates the buyer and seller, but the term invoice
indicates money is owed or owing. In English, the context of the term invoice is usually used to
clarify its meaning, such as "We sent them an invoice" (they owe us money) or "We received an
invoice from them" (we owe them money).
 I N V O I C E
Adams Manufacturing Company
19 Union Street
Kansas City, MO 99999
((909)229-3584

Sold to: Ship to:

Dennis Blalock Zenith Company Warehouse
10 Fairway Avenue 12 Cobbler Street
San Francisco, CA 99999 Los Angeles, CA 99999

Invoice No. Date and Time Purchase Order Shipped Shipper Terms

777 11/17/06 6895 11/17/06 Jones Truck Co. Net 15

Quantity Description Price Each Amount

Basic 15 sets Model S irons 60.00 900.00

invoice
50 dozen X3Y Shur-par golf balls 7.00 350.00
A
typical Invoice Total $1,250.00
invoice
VAT 10% 125.00

Sub Total $1,375.00

Terms of Payments

Cash on Delivery

contains:

The word "INVOICE"

A unique reference number (in case of correspondence about the invoice)

Date of the invoice

Name and contact details of the seller

Tax or company registration details of seller (if relevant)

Name and contact details of the buyer

Date that the product was sent or delivered

Purchase order number (or similar tracking numbers requested by the buyer to be mentioned on
the invoice)

Description of the product(s)

Unit price(s) of the product(s) (if relevant)

Total amount charged (optionally with breakdown of taxes, if relevant)

Payment terms (including method of payment, date of payment, and details about charges late
payment).Some countries requires a VAT (value added tax) identification number on invoices
between entities registered for [Link]://[Link]/wiki/Invoice - cite_note-2#cite_note-2

There are many different types of invoices:

Pro forma invoice - In foreign trade, a pro forma invoice is a document that states a
commitment from the seller to provide specified goods to the buyer at specific prices. It is often
used to declare value for customs. It is not a true invoice, because the seller does not record a
pro forma invoice as an accounts receivable and the buyer does not record a pro forma invoice as
an accounts payable. A pro forma invoice is not issued by the seller until the seller and buyer
have agreed to the terms of the order. In few cases, pro forma invoice is issued for obtaining
advance payments from buyer, either for start of production or for security of the goods
produced.

Credit Note- is a document sent by a seller to the buyer to correct an overcharge or to give a
refund. If the buyer returns the product, the seller usually issues a credit memo/note for the same
or lower amount than the invoice, and then refunds the money to the buyer, or the buyer can
apply for a credit note or another invoice if his/her invoice was erroneously overcharged or few
products were delivered than quoted on the delivery note and invoice or when he/she return
refundable packing materials.

Commercial invoice - a customs declaration form used in international trade that describes the
parties’ involved in the shipping transaction, the goods being transported, and the value of the
goods. It is the primary document used by customs, and must meet specific customs
requirements, such as the Harmonized System number and the country of manufacture. It is used
to calculate tariffs.

Debit Note - is a document sent by a seller to the buyer to correct an undercharge? When a
company fails to pay or short-pays an invoice, it is common practice to issue a debit note for the
balance and any late fees owed. In function debit notes are identical to invoices. A debit note is
issued when too many goods were supplied to the buyer and the buyer has agreed to keep them.
Some organization instead of issuing a debit note, they issue out a fresh invoice.

Self-billing invoice - A self billing invoice is when the buyer issues the invoice to himself (e.g.
according to the consumption levels he is taking out of a vendor managed inventory stock).

Timesheet - Invoices for hourly services such as by lawyers and consultants often pull data from
a timesheet.

8. Statement of Accounts- A periodic customer statement includes opening balance (amount

outstanding from previous month’s statement), invoices, payments (received since the last
statement was issued), discounts offered, credit notes, debit notes, and ending balance for the
customer's account during a specified period. A monthly statement can be used as a summary
invoice to request a single payment for accrued monthly charges.
Cheque - A cheque (or check - USA) is a negotiable instrument instructing a financial
institution to pay a specific amount of a specific currency from a specified demand account held
in the maker/depositor's name with that institution. Both the maker and payee may be natural
persons or legal entities.

Parts of a cheque

Cheques generally contain:

Place of issue, Cheque number, Date of issue, Payee, Amount of currency, Signature of the
drawer, Routing / account.

A cheque is generally valid indefinitely or for six months after the date of issue unless otherwise
indicated; this varies depending on where the cheque is drawn.

Receipt - is a written acknowledgement that a specified article or sum of money has been
received as an exchange. The receipt acts as the title to the property obtained in the exchange.
[Link]
Image:[Link] English speaking countries the term most frequently applies to the
printed record given to a customer at checkout that lists the purchases made, the total amount of
the transaction including taxes, discounts and other adjustments, the amount paid and the method
of payment, warranty or return details, special offers, advertisements or coupons. Receipts may
also be provided for non-retail operations such as banking transactions. Printed receipts are
usually produced by thermal printing on rolls of narrow paper tape, although dot-matrix
technology is also used] Recent innovations have led to multi-colored thermal printing
technology and the ability to print double-sided receipts.

Gift receipts

Receipts may be presented as proof of a transaction for the purpose of exchanging or returning
merchandise. Some retailers provide special "gift receipts". Unlike a standard purchase receipt,
the gift receipt omits certain information, most notably the price that was paid for an item. The
receipt usually has a barcode along the bottom so that the retailer can call up the transaction
information from a database of previous purchases, thus authenticating a return.

Debit card
A debit card (also known as a bank card or check card) is a plastic card that provides an
alternative payment method to cash when making purchases. Functionally, it can be called an
electronic cheque, as the funds are withdrawn directly from either the bank account or from the
remaining balance on the card. In some cases, the cards are designed exclusively for use on the
Internet, and so there is no physical card. The use of debit cards has become widespread in many
countries and has overtaken the cheque and in some instances cash transactions by volume. Like
credit cards, debit cards are used widely for telephone and Internet purchases, and unlike credit
cards the funds are transferred from the bearer's bank account instead of having the bearer to pay
back on a later date.
Debit cards can also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash and as a cheque guarantee card. Merchants can also offer
"cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with
their purchase.

The Difference between Credit and Debit Cards?

For consumers, the difference between a "debit card" and a "credit card" is that the debit card
deducts the balance from a deposit account, like a checking account, whereas the credit card
allows the consumer to spend money on credit to the issuing bank. In other words, a debit card
uses the money you have and a credit card uses the money you don't have. "Debit cards" which
are linked directly to a checking account are sometimes dual-purpose, so that they can be used as
a credit card, and can be charged by merchants using the traditional credit networks. A merchant
will ask for "credit or debit?" if the card is a combined credit+debit card. If the payee chooses
"credit", the credit balance will be debited the amount of the purchase which is then withdrawn at
a later date; if the payee chooses "debit", the bank account balance will be debited the amount of
the purchase and the money will be withdrawn from the bank account immediately. Another
option is to have a credit connected to the bank account so that if there is no money on it, the
bank allows some negative balance according to a credit agreement. Then the customer does not
have to choose credit or debit, the debit card turns into a credit card if there is not enough
account balance.

The "debit" networks usually require that a personal identification number (PIN) be supplied.
The "credit" networks typically require that purchases be made in person and often allow cards to
be charged with only a signature, and/or picture ID. However, most merchant agreements in the
United States forbid picture ID as a requirement to use a Credit Card. This varies between
countries, and in for example Sweden most merchants require picture ID unless a PIN code is
used, or banks won't cover merchant losses for stolen cards.
Advantages and Disadvantages
Debit and check cards, as they have become widespread, have revealed numerous advantages
and disadvantages to the consumer and retailer alike.

Advantages are as follows:

 A consumer who is not credit worthy and may find it difficult or impossible to obtain a credit
card can more easily obtain a debit card, allowing him/her to make plastic transactions.
 Use of a debit card is limited to the existing funds in the account to which it is linked (except
cases of offline payments), thereby preventing the consumer from racking up debt as a result
of its use, or being charged interest, late fees, or fees exclusive to credit cards.
 For most transactions, a check card can be used to avoid check writing altogether. Check
cards debit funds from the user's account on the spot, thereby finalizing the transaction at the
time of purchase, and bypassing the requirement to pay a credit card bill at a later date, or to
write an insecure check containing the account holder's personal information.
 Like credit cards, debit cards are accepted by merchants with less identification and scrutiny
than personal checks, thereby making transactions quicker and less intrusive. Unlike personal
checks, merchants generally do not believe that a payment via a debit card may be later
dishonored.
 Unlike a credit card, which charges higher fees and interest rates when a cash advance is
obtained, a debit card may be used to obtain cash from an ATM or a PIN-based transaction at
no extra charge, other than a foreign ATM fee.
The Debit card has many disadvantages as opposed to cash or credit:
 Many banks are now charging over-limit fees or non-sufficient funds fees based upon pre-
authorizations, and even attempted but refused transactions by the merchant (some of which
may not even be known by the client).
 Many merchants mistakenly believe that amounts owed can be "taken" from a customer's
account after a debit card (or number) has been presented, without agreement as to date,
payee name, amount and currency, thus causing penalty fees for overdrafts, over-the-limit,
amounts not available causing further rejections or overdrafts, and rejected transactions by
some banks.
 In some countries debit cards offer lower levels of security protection than credit cards. Theft
of the users PIN using skimming devices can be accomplished much easier with a PIN input
than with a signature-based credit transaction. However, theft of users' PIN codes using
skimming devices can be equally easily accomplished with a debit transaction PIN input, as
with a credit transaction PIN input, and theft using a signature-based credit transaction is
equally easy as theft using a signature-based debit transaction.
 In many places, laws protect the consumer from fraud much less than with a credit card.
While the holder of a credit card is legally responsible for only a minimal amount of a
fraudulent transaction made with a credit card, which is often waived by the bank, the
consumer may be held liable for hundreds of dollars, or even the entire value of fraudulent
debit transactions. The consumer also has a shorter time (usually just two days) to report such
fraud to the bank in order to be eligible for such a waiver with a debit card, whereas with a
credit card, this time may be up to 60 days. A thief who obtains or clones a debit card along
with its PIN may be able to clean out the consumer's bank account, and the consumer will
have no recourse.

CREDIT CARDS

When using a credit card it should be done wisely and only if you really need to use it. Some
advantages and disadvantages of using a credit card are as follows:

Advantages:
 1. You can purchase items on the spot and pay later
2. You do not have to use cash
3. No need to write a check

The major advantages of having a credit card:-

Convenience - Obviously this is arguably the biggest advantage to owning any type of credit
card. There is no having to dig around for cash, or trying to find your cheque book. It's quick and
easy to hand the clerk your credit card. They are also accepted around the world by most every
merchant. You may find it difficult to write an American check while visiting Italy.

Credit Score - Using a credit card wisely, and correctly, will build your credit score and
improve your future credit purchases, such as a home. Every month your credit report is updated
with payments that are made. Lenders look at your credit history to see if you pay your bills, pay
them on time, and how much you charge up. Your credit history and score is like your financial
life blood so to speak.

Monthly Budget - Having a credit card can help you budget your monthly bills. Keep in mind
though, this will only work if you pay off the entire balance every month. You'll have your
monthly credit card statement that itemizes your transactions each month and you will know
exactly what you have spent. If you are disciplined, this works well.

Credit Card Float - A float is the time from which you charged an item, and the date in which
full payment is due in order to avoid interest charges. You can really use this to your advantage
if you're smart. Many times you will get an extra 30 days to pay off the balance before interest
kicks in.

Credit Card Rewards - Many credit card companies offer rewards that you can never get by using
cash, checks, or a debit card. Credit card reward programs include cash back, airline rewards,
and other merchandise programs. These rewards can be a nice addition that comes in handy at
times.

Disadvantages:
1. You pay a high cost to borrow money which is your finance charges and interest rates
2. You debt load is increased and so is your debt to income ratio
3. You decrease the amount that you should be saving in the bank because you are paying
interest and financial charges.
4. Have less money each month for household expenses
5. You can easily overspend and create real bad financial difficulties.

Credit cards can be very costly if you do not watch what you spend. A rule that you should
follow is if you don't need it don't use it. If you buy items using you credit cards you will have to
pay the lend era finance charge for the use of their money. The finance charge is the total amount
you will pay which includes interest rate costs and other cost such as services charges and
possible other charges.

If you are having a credit card debt problem one way to get out is to consolidate your debt. To
get started just fill out our debt form and one of our counselors will call you to discuss how they
can assist you.

3.2: THE PETTY CASH BOOK

CONTENT

 Describe the operation of a petty cash system.

 Complete a petty cash account from information supplied, including petty cash vouchers.

Is a subsidiary of the Cash Book used to record small payments like carriage, postage, local
conveyance etc., which by nature, cannot be, paid by cheque are dealt through another cash book
known as "Petty Cash Book". Just like the Cash book, the Petty Cash Book is both a book of
original entry and a ledger account. Analysis columns are used in the Petty Cash Book to identify
areas of payments.

In order to keep a Petty Cash Book, the business will assign the person responsible for recording
entries in the Cash Book to task a Petty Cashier to handle and record small cash payments in the
Petty Cash Book. Whenever the cashier pays out money he/she must make sure the amount
corresponds with the amount on the authorized voucher. No payments must be made if there is
no signed authorized voucher as the cashier may be forced to use his/her money to cover the
shortfall of the Petty Cash. When payment is made, the person receiving the money must sign the
voucher, which clearly shows what the payment was for. Vouchers are numbered and receipts
can also be attached to the vouchers as proof of payment.

At the end of the period (Month) the petty cashier will balance his/her Petty Cash Book to find
out how much was paid pout and how much is remaining. After this he/she will approach the
supervisor to be reimbursed (refunded) the money he/she paid out, e.g. if the cashier spent
P207.00 out of the P300.00 given he/she must claim the P207 from the supervisor.

The imprest system is a system where the supervisor gives the petty cashier enough money to
cover the petty cash requirements for the following period. The float is the money given to the
petty cahier for small payments.

Advantages of having a Petty Cash Book

The handling of work can be subdivided between a numbers of employees. The Cash Book
cashier will delegate the work to junior accounts staff.

It frees the Cash Book from too many entries.

The style of the petty cash book allows for the analysis columns to be used, which facilitates
easier ledger posting.

Making entries in the Petty Cash Book

The petty cash book is written up like:

1. In the first column write the date of payment, then the next column write a description of the
item and next allocate each item a separate number. This should actually be written on the
receipt for the payment and also in the third column. File all the receipts in number order to
make them easy for you, us and the tax authorities to find. This can be done by just sticking them
on a bit of paper and putting them in an A4 ring binder. You will save money and time in the
 long run by doing this. The next column is the total column. This is the amount you actually
paid.

3. The next column shows the amount of vat included in the payment. If the amount of VAT paid
is not shown on the receipt or invoice you have got and it has a VAT on it you can calculate the
VAT If it is clear no VAT was paid e.g. because there is no VAT number on the receipt then the
VAT column should be left blank. This may not be covered in some syllabuses.

4. The net expense should then be analysed between the remaining columns as appropriate for
your business. Suitable headings are written in the analysis columns.

5. Finally, rule/underlines the bottom line for each month and add up the columns. To check this
make sure the sum of the total paid column equals the total of all the other columns added
together. Balance the Petty cash Book and bring down the balance for next month.

Exhibit: The Layout of a completed Petty Cash Book

PETTY CASH BOOK FOR THE PERIOD ENDED 31

DECEMBER 2007

Vouche Motor
r

Receipt Numbe Expense Cleanin Travellin

s Folio Date Details r Total s g Postage g

CB1
300.00 1 1-Mar Cash

2-Mar Postage 1 15.00 15.00

3-Mar Bus Fare 2 16.00 16.00

3-Mar Cleaner 3
 7.00 7.00

Train
4-Mar Fare 4 12.00 12.00

5-Mar Petrol 5 12.00 12.00

6-Mar Postage 6 9.00 9.00

7-Mar Cleaning 7 7.00 7.00

Lubricant
8-Mar s 8 6.00 6.00

Mile
9-Mar Service 9 17.00 17.00

10-Mar Cleaning 10 5.00 5.00

Train
11-Mar Fare 11 6.00 6.00

12-Mar Bus Fare 12 7.00 7.00

13-Mar Cleaning 13 7.00 7.00

Cleaning
14-Mar Materials 14 19.00 19.00

17-Mar Postage 15 27.00 27.00

 24-Mar Petrol 16 21.00 21.00

27-Mar Cleaning 17 14.00 - 14.00 - -

207.0
0 56.00 59.00 51.00 41.00

207.00 31-Mar Cash

Balance 300.0
- 31-Mar c/d 0

507.0
507.00 0

Balance
300.00 1-Apr b/d

GUIDELINES FOR THE SECURITY OF PETTY CASH

 Check sums of money carefully before handing them over.

 Lock the cash in a cash box and keep it in a locked safe.
 Locate the keys of the cash box in a safe and secure place, which is only accessible to the
petty cashier and supervisor.
 Do not leave your office unattended with the cash box unlocked.
 Ensure that every payment of cash is supported by an authorized petty cash voucher.
 Make regular checks of the petty cash account and cash to ensure that the petty cash vouchers
received + cash held in the box = imprest.
 Petty cash vouchers are numbered as they are issued, received and filed numerically.

Whenever the Petty Cashier issues out / pays out money a Petty Cash Voucher must be
completed. Below is a sample of the Petty Cash Voucher

PETTY CASH VOUCHER

PETTY CASH VOUCHER Voucher No: 10

Date: 07/10/08

For What Required Pula Thebe

Postage stamps 5 20

Total Amount 5 20

Authorised by: admin manager

Received by: P Moyo