Riverside Bowls Club: an imprest that will not restore itself
Riverside Bowls Club runs a £300 imprest petty cash system, reimbursed on the first of each month so the float returns to £300. On 1 June the float stood at £300. During June the following vouchers were paid: postage £42.60, travel £68.20, stationery £29.75 and cleaning £35.00. The treasurer also accepted an IOU for £50 from the bar steward, who took cash for a personal emergency and promised to repay it on payday. One voucher for £18.00 has no receipt attached and is signed by the bar steward alone. Cash counted in the box on 30 June was £54.10. Club rules state that no reimbursement may be made without a receipted voucher approved by the treasurer.
1. Calculate the amount to be reimbursed on 1 July and show how the £300 float is restored. State the treatment of the IOU and of the missing cash.
Read the worked answer
What the float should contain
| £ | |
|---|---|
| Receipted, authorised vouchers: 42.60 + 68.20 + 29.75 + 35.00 | 175.55 |
| IOU - bar steward | 50.00 |
| Cash counted | 54.10 |
| Total accounted for | 279.65 |
| Float | 300.00 |
| Shortage | 20.35 |
Reimbursement and restoration
- Pay only the valid vouchers: £175.55 drawn from the bank. Cash becomes 54.10 + 175.55 = 229.65.
- The £50 IOU is not a petty cash payment. The bar steward repays £50 in cash (or it is deducted from wages with his written agreement): cash becomes 279.65.
- The £20.35 shortage is written off to a cash difference account (Dr Cash difference £20.35, Cr Petty cash £20.35) but only with committee approval. If the club chooses to make good the loss, a further £20.35 is drawn: 279.65 + 20.35 = £300.00, and the float is restored.
The key point: the float is only genuinely restored when every pound is either cash in the box or a valid voucher. Reimbursing the full £300 would bury both the IOU and the shortage inside the reimbursement.
2. The bar steward argues the IOU is 'just another voucher'. Explain why it cannot be treated as a petty cash payment and what should happen instead.
Read the worked answer
A petty cash voucher is evidence of an expense incurred for the club - the club has received something (postage, cleaning, travel) and the cash is gone for good. The money is consumed.
An IOU is evidence of a debt owed to the club by a named person. No expense has arisen, and if the IOU were reimbursed through the imprest the club would:
- record an expense that has not happened, understating the surplus for the year;
- convert a recoverable debt into a payment out of club funds, effectively letting the steward borrow from the club permanently;
- breach the rule that only receipted, approved vouchers are reimbursed.
What should happen
- The IOU stays in the box as a recorded receivable from the steward until repaid - do not remove it or put it through as a voucher.
- Repay it in cash, or recover it from wages only with his written authorisation.
- Report it to the committee; loans to officers are a governance matter, not a bookkeeping one.
- If it is not repaid, the amount must be written off as an irrecoverable amount due from an employee, disclosed separately - not disguised as postage or cleaning.
3. Advise the treasurer on the £18.00 voucher with no receipt. Should it be reimbursed? Give your reasoning and recommend two changes to the petty cash procedures.
Read the worked answer
Do not reimburse it as it stands. The club rule is explicit, and an unreceipted voucher signed by the person who spent the money is self-authorisation. Reimbursing it would make the receipt rule unenforceable for every future claim.
Practical route, in order:
- Ask the bar steward to obtain a duplicate receipt from the supplier.
- If that is impossible, the treasurer and one other committee member should satisfy themselves the expense was genuinely incurred, sign the voucher jointly and mark it 'no receipt - independently verified'.
- Reimburse only after that. If no one can verify it, the £18.00 is disallowed and the steward bears it.
Two procedural changes
- Segregate custody from checking. The float should be held by someone other than the person who authorises reimbursement (now the treasurer does both). A committee member should count the box unannounced each quarter and sign the count sheet.
- Cap and pre-approve. Set a per-item limit and a rule that no IOU, advance or personal loan may ever be met from petty cash. Vouchers should be completed and signed by the payee at the time of payment, not reconstructed at month end.
A third acceptable change: replace small cash payments with a business debit card for postage and travel, leaving petty cash only for genuinely cash items.