Petty Cash needs to be ‘rethunk.’ new word invented… :-)

Dear Editor,

What kind of stuff is included in Petty Cash?

I really don’t think B. has a petty cash float – but there were receipts already setup in a petty cash file –
The receipts consist of blank receipts with no vendor name, just an amount and/or receipts for small foods items.

How do I handle this.

Thanks

S


Hi S,

Just like in everything else around audit ready bookkeeping; thoughts and perspectives continue to evolve.
I had an auditor say to me one day. “How I see the topic of Petty Cash is; there is no such expense, I want to see what the business expense is.”
This caused me to stop and rethink my concept of petty cash.
In the old days, my thinking was that the various small expenses that could be put in petty cash saved detailed story writing for small expenses and was a good catch all for things that we did not have an official category for.
My new thinking is. There is nothing that does not fall into categories that we already have. (If I am wrong, just let me know and I will add the category to ARBooks.)
Petty cash is now in my mind a box where we keep cash (A cash float) for little things that need cash to pay for. One either writes a cheque made out to petty cash and does no entries in BKS for the expenses. Or they put a cash deposit in the box and record that amount of dollars in Income in ARBooks.
Then what ever the expenses are they are entered into the correct category in ARBooks. This is a shift in thinking to bring Petty Cash into alignment with the purpose of ARBooks which is to make a user fully aware of how they spend money.
Consider this…. John spends $400 a year in pizza and $200 on coffee and $300 on bottled water for the office…. but his petty cash recordings show $900 in what way is John wiser? The answer is that Petty Cash does not inform the user, and when petty cash gets too high, it needlessly attracts the attention of CRA.
So let’s LL move away from promoting the use of small amounts go into Petty cash. “All expenses are real and none are petty when they are added up.”

Best Regards
Dan

 


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