Making Payments
? All payments must be made by a cheque
? The cheque butts are the documents as proof
Why Cheques
? Proper recording
? Proof
? Easy to check/reconcile
? Eliminate fraud, cheating and theft of cash

But what about
? Paying for a newspaper
? Paying for tea and sugar etc
? Paying people who do not accept cheques for small amounts
It would be silly to write a cheque for an amount of five cents.

To make payments for small payments:
? Find out how much payment you make in a month for small amounts.
? Say, you discover that on average you spend $20 a month on newspaper, postage, coffee etc.
? Write cash cheque of $20.
? Cash the cheque at the Bank.
? Keep the Cash in a small safe in your office.
? When you need to make small payments of say $1.20 for the newspaper, take the cash from you little safe and make the payment.
? Keep a record of all the cash that has been taken out (Use a voucher)
? When the cash in the safe is running low, replenish (refill, reimburse, bring it to full) it to $20.
? For example you have used up $18.00 from the $20.00 you had. That is, only $2.00 is remaining in the safe. You need to write a cheque of $18 this time and cashing it so as to bring the total back to $20.
This system of making small payments is called: PETTY CASH SYSTEM
It is a system of controlling cash.




Accounting for Petty Cash
How do you RECORD Petty Cash.
Starting Point
? Write a cash cheque of $100 and cash it (you have estimated that you’d need this amount every month)
? Record the payment in cash Payments Journal