The purchases cycle
Lesson 6
Types of payments
Petty cash
Cash payments journal
Practical examples
Lesson Objectives
Layout of the CRJ
CRJ-01
Debit
Date Invoice Description Amount Account Reference Accounts Receivable Cash Other
Credit
CASH RECEIPTS JOURNAL
Importance of the cash cycles
• Critical for operations
• Spending as important asincoming cash
• Policies and procedures
Process
Generate purchase order
Receive invoice
Purchases journal
Generate disbursement
Impact CPJ
Need to order items Delivery of goods Billing Settlement
Cycles impacted• Inventory
• Equipment and supplies
• Logistics
• Capital purchases
• Services
• Operating items
• Once-off
Petty cash
• For purchases where the bankcharges would be an unnecessaryexpense
• Immaterial amount of cash onhand for smaller purchases
• Unplanned expenditure
z
Petty cash
• Imprest system
• General ledger
• Petty cash vouchers
• Log
• Reconciliations
• Receipts recorded asexpenses
Examples
• Printer ink
• Postage
• Office supplies or stationery
• Coffee and tea
• Fuel and parking
• Reimbursements
1. Transfer funds from bankaccount to petty cash account
2. Log disbursements andreimbursements
3. Capture receipts as expenses4. Prepare reconciliation5. Top-up petty cash account
Process
CPJBook of first entry
Records all payments using cash
aka disbursements
• Purchases
• Suppliers
• Rent
• Salaries
• Insurance
Layout
CPJ-01
Credit
Date Disbursement Description Amount Account Reference Accounts Payable Purchases Other
Debit
CASH PAYMENTS JOURNAL
Other considerations• Tax
• Differs from country to countryand state to state
• Paid to vendor
• Reduce tax liability to be paid overto the revenue service
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