Petty Cash Expenses

The best way to identify when a Petty Cash system is in use is when you have a petty cash book and you use petty cash vouchers. You keep money in the petty cash box to meet small day to day expenditure. Typical expenses are milk for the canteen or buying biscuits for the visitors.

You start the month with a cash float in the petty cash box and each time you pay out for something you get a receipt (little invoice) for each amount spent. You get the person claiming the expense to sign the petty cash voucher and attach the petty cash voucher to the receipt.

You record each numbered voucher in a petty cash book and analyse the type of expense incurred. At the end of the month you total the book and you have a total for each type of expense e.g. canteen costs.

You should set up a supplier account in your creditors ledger for Petty Cash and record each cheque written for Petty Cash in this account and also post the summary totals from the Petty Cash book into this account. This will now give you a easy to read summary of petty cash for every month and also show you the total for the year spent on petty cash.

Expenses

Expenses, Sales Rep Expenses and Directors Expenses are all the same in that someone else paid for the expense and they will then be refunded for that expense at a later date. They are different to Petty Cash expenses in that they are usually larger amounts for which there would be insufficient money in the petty cash box to meet the cost.

Sales Rep Expenses

Sales Rep expense are usually dealt with by the Sales Rep completing an expense claim form. For example, he would enter on the form each day he bought lunch or record his mileage claim for the running of his own car when used for business purposes. He would then be paid with by a cheque at the end of the month once his expense claim was passed by his manager.

You should set up a supplier account for each sales rep in your accounts system. This will allow you to see expenses incurred by each rep easily. Post the cheque paid to the sales rep into his supplier account and the cheque should always match the expense claim and you know they got paid what they were due.

Directors Expenses

Directors expenses are usually the same as Sales Rep expense except that in some cases the Director may pay a supplier using his own money. This could be because the business had no money in its bank account. A supplier wanted payment by credit card and the business had no business credit card or the credit limit on the card was not high enough. Or the Director used the wrong card to pay the invoice with.

In these cases the Director should put in a normal expense claim form but claim for supplier invoices paid for by him on a separate claim form. This allows you the bookkeeper to administer his expense in an easier manner, differentiating his normal expense from exceptional costs he incurred on behalf of the business.

Set up an expense account for each director to record in a manner similar to the sales reps his costs and what he was refunded for.

For other invoices you should set up a supplier account for "suppliers paid for by the director" account. In this account there maybe unpaid invoices as the director may have to wait to get his money back if the company has cash flow problems.

The idea behind each of these expense account types is to make it easy for you as a bookkeeper to keep track of what is going on, who is due to be paid and what for. With Sales Rep expenses it means you only have to deal with a monthly claim and not lots of small receipts. With petty cash you wont have to record each and every small transaction  in your accounts system, you can instead take the summary totals from the petty cash book. And when directors start paying supplier invoices, you can keep track of what is and is not owing to suppliers and avoid paying invoices twice, once by the director and once more by the business.