Petty cash voucher definition

Example- One can attach the bill of an expense along with the primary voucher to support the same. This is vital since it helps ensure correct financial documentation where no essential details are left unrecorded. For every payment transaction made by an organization to be recorded accurately without any discrepancies or errors, it should use receipts for each payment made. As opposed to gift vouchers that might be used by consumers when buying products, this kind of document is mainly employed for internal purposes of accounting along with other financial operations. To grasp how to fill out a cash voucher, pick the date, mention the name of the person to whom it is paid, the amount in figures and words, the purpose, and get the proper authorization. A cash voucher can be defined as an official document that contains information about various cash dealings within an entity.

Accounting Voucher: Format & Types of Vouchers

For example, the Galaxy’s Best Yogurt maintains a petty cash box with a stated balance of $75 at all times. In managing petty cash and other cash transactions, it would be prudent to adhere to the specified format and instructions to have a clear picture of all financial transactions. A Voucher is an initial recording document of purchase, sales, receipt, or payment.

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For the past 52 years, Harold Averkamp (CPA, MBA) hasworked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. The voucher documents that the tasks are performed by multiple people and creates a paper trail so that an auditor can confirm that the duties were properly segregated. It is used by an organization to keep records of small amounts of money that it spends as well as reimbursed expenditures. A filled cash voucher sample will have all completed fields such as date issued, payee’s name, amount and signature. Normally, the setup of this form includes a heading section, payee details section, transaction segment, authorization part and additional details if any.

Petty cash vouchers are also referred to as petty cash receipts and can be purchased from office supply stores. If the balance in the petty cash account is supposed to be $75, then the petty cash box should contain $45 in signed receipts and $30 in cash. Assume that when the box is counted, there are $45 in receipts and $25 in cash. This creates a $5 shortage that needs to be replaced from the checking account. At month-end, the information in the vouchers is compiled to create a journal entry to credit the petty cash account and debit a variety of expense accounts (depending upon the uses to which the cash was put). The vouchers are attached to the journal entry as evidence of the underlying transactions.

The importance of a voucher lies in the fact that it is an internal accounting control mechanism that ensures that every payment is properly authorized and that the purchased item is actually received. But to make the entries and to form financial statements further, transactions need to be recorded in a more systematic manner and this is the step where ‘vouchers’ comes into existence. If the management at a later date decides to decrease the balance in the petty cash account, the previous entry would be reversed, with cash being debited and petty cash being credited. This voucher is used when an organization pays others for Salary and wage payment, Payment for Raw materials, Loan repayments, etc. Hence, Cash Payment Voucher and Bank Payment Voucher will be treated as the debit voucher also. The voucher also includes the general ledger accounts used to record the transaction.

Understanding Vouchers

Additionally, vouchers also act as a check-and-balance tool and reduce the risk of employee theft. The internal audit staff may schedule a review of cash vouchers, to see if the items reimbursed comply with the company’s policy for petty cash use. It is possible that a firm’s outside auditors will also review cash vouchers, but this is unlikely, since any errors in this area are immaterial to the results stated in a company’s financial statements. As we have discussed, one of the hardest assets to control within any organization is cash.

Vouchers are prepared to support the accounting entries made in the books of accounts to provide correctness to the transactions. Initially, every transaction finds a place in the source documents and then using source documents, every transaction is recorded in the form of vouchers. For every business firm or party involved, there are vouchers in the name of every firm with their specific name.

1. The importance of a voucher lies in the fact that it is an internal accounting control mechanism that ensures that every payment is properly authorized and that the purchased item is actually received.
2. But to make the entries and to form financial statements further, transactions need to be recorded in a more systematic manner and this is the step where ‘vouchers’ comes into existence.
3. This creates a $5 shortage that needs to be replaced from the checking account.
4. Every voucher indicates the accounts that are required to be credited or debited.

In the event that all of the cash in the account is used before the end of the established time period, it can be replenished in the same way at any time more cash is needed. If the petty cash account often needs to be replenished before the end of the accounting period, management may decide to increase the cash balance in the account. If, for example, management of the Galaxy’s Best Yogurt decides to increase the petty cash balance to $100 from the current balance of $75, the journal entry to do this on August 1 would be as follows. The petty cash voucher is an important form of evidence for reconciling the remaining cash in the petty cash box.

This is considered completed contract method definition as the primary document of the business which describes and authorizes the payment of the company. Vouchers can be used as manual or computerized systems as preferred by business organizations. Vouchers that companies use in accounting provide the information needed to pay liabilities, primarily those to vendors.

In this case, the cash account, which includes checking accounts, is decreased, while the funds are moved to the petty cash account. One asset is increasing, while another asset is decreasing by the same account. Since the petty cash account is an imprest account, this balance will never change and will remain on the balance sheet at $75, unless management elects to change the petty cash balance. The voucher, which is a cover page that explains the attached documents, includes the purchase order, shipping receipt, and invoice.

What is Accounting Voucher?

The purchase amount is added and recorded to accounts payable on the balance sheet until paid. The owner reviews all the voucher information before signing a check. The Galaxy’s Best Yogurt establishes a petty cash fund on July 1 by cashing a check for $75 from its checking account and placing cash in the petty cash box. At this point, the petty cash box has $75 to be used for small expenses with the authorization of the responsible manager. The journal entry to establish the petty cash fund would be as follows.

Within financial transactions, cash voucher is a very important word. The article below discusses the details concerning how cash vouchers look like and an example that demonstrates their usage. At the end of July, in the petty cash box there should be a receipt for the postage stamp purchase, a receipt for the milk, a receipt for the window cleaner, and the remaining cash. The employee your taxable income in charge of the petty cash box should sign each receipt when the purchase is made.

Recall that materiality means that the dollar amount in question would have a significant impact in financial results or influence investor decisions. As cash is spent from a petty cash fund, it is replaced with a receipt of the purchase. At all times, the balance in the petty cash box should be equal to the cash in the box plus the receipts showing purchases. Understanding what a cash voucher is and how to use it is crucial for effective financial management. Cash vouchers help in promoting accountability while making finances flow smoothly. The total amount of all the vouchers that have outstanding balances owed is recorded as accounts payable on the balance sheet.