Accounts and Finance
AP and AR Process

Suppose Company ask you to withdraw  5000 Cash from SBI Bank and keep with you for day to day expenses of office

What is this cash called?


This cash is called Petty cash


What entry should be passed by you


Cash Dr/Petty Cash Dr

          To SBI bank

it is a Contra entry in Tally


Where should you keep this cash?

In your pocket or somewhere else?


This cash should be kept at a secure locker kept at Accounts Department

It should never be kept in pocket or taken home


Suppose a Peon Ravi ask for Rs 1000 for purchasing tea and biscuits

What will you do


We will get his as well as his Admin  manager's sign on Cash Voucher (IOU -I Owe You Form)


Petty Cash Procedure in Companies for Cashiers - Cash Handling and Reconcilation Process


No entry to be passed in Tally


Suppose peon Ravi spends 800 and return 200

What entry is to be passed


Office Maintainance Dr   800

             To Cash  800

(No entry required of 200)


What if Ravi does not submit bill within time allowed as per Company's policy?


In this case,Entry is to be passed

 Ravi a/c     Dr

      To    Cash a/c

 This amount is recovered from his next salary


How is Cash Reconciliation Prepared in this case of Cash Verification


When a cashier gives advance to an employee, he gets “I owe you” form signed by the employee. The employee has to submit bills, or return back the money within a certain period. If he fails to do so, the amount is debited in his account by passing the entry as:

     Employee a/c     Dr

To    Cash a/c

Hence balance of cash a/c as per Tally may not match, with actual cash. Hence reconciliation is prepared in the following format:


Balance of cash a/c as per Tally           ____________________________

 Less: I owe you forms                          ____________________________

 Actual cash balance                             ____________________________

If actual cash balance does not match, then cash has not been handled properly.



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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.