Financial operations

Accounting stationery

Bank accounts

Cash book

Cash receipts

Receipts

Payments

Cash based or accrual accounting 

Bank reconciliation

Petty cash

Payroll

Accounting for GST

Accounting stationery

In order to get started with the financial operations aspect of their role, the Treasurer will need the following accounting stationery:

• Cheque books
• Bank deposit books
• A cash book or a general ledger
• Payment authorisation (cheque requisition) vouchers
• A numbered receipt book with carbon copy page
• Account forms for members' subscriptions
• A petty cash payment book and petty cash vouchers
• A file for accounts payable
• A file to store receipts from accounts paid
• A file of orders placed with suppliers
• A file to store bank statements

Bank accounts

A cheque account is a must for a well-run Club. A cheque account provides a convenient record of payment through the cheque butt. It is therefore essential that cheque butts are completed when cheques are drawn and the cheque number is written on the creditors invoice when payment is made. Cheques also provide a secure method of payment. This means that in most circumstances members need not carry cash.

It is usually a requirement of the constitution to have at least two management committee members (Treasurer and 1-3 others) with authority to jointly sign cheques.  It is never a good idea to sign cheques:

• Before all other details have been completed (e.g. date, amount, payee)
• Without an accompanying invoice from the supplier
• Before checking that goods have been received or services completed

It is good practice to pay all invoices and accounts from the cheque account, as all expenditure will be recorded on the account statement. Depending upon the average number of transactions, bank statements can be requested quarterly, monthly or more frequently.

Cash book

The cash book, also known as the cash receipts and cash payments journal, is used to record all of the Club's receipts and payments. Cash means bank notes, credit card slips, cheques and money orders. The Treasurer should regularly record the details of receipts and payments in the cash book.

To determine the cash balance, total the receipts and deduct payments. Other items that will affect the cash balance are bank interest and charges, government taxes, unpresented cheques, dishonoured (bounced) cheques, and direct credits or debits from other accounts. At the end of each month, the figures recorded in the cash book can be checked against the bank. The cash book closing balance for each month becomes the opening balance for the next month. It is also a good practice to summarise what the Club owes to external or third parties (creditors) and what money is owed to the Club itself (debtors). 

In small Clubs, the cash book is usually a manual system based on a ruled ledger book available from most newsagents and office supply companies. Some Clubs record receipts in the front of the cash book and payments in the back. It is a relatively simply process to set up a cash book using a spreadsheet program.

Cash receipts    

The Treasurer is the custodian of all the funds of the Club and so must deal with them in an appropriate manner. He/she is therefore the trustee of the Club's money and must be accountable.

All monies received must be receipted, and this is done by keeping a pre-numbered carbon duplicate receipt book. The original copy is given to the payer and the duplicate copy is kept as a record of the transaction.

Any receipting system must be able to show:

• Date monies received
• The person paying the money
• The amount being paid
• The purpose of the payment
• Signature of the person receiving the money

Sometimes it may not be possible to record the names of all people who contributed money. Examples would be gate takings, raffles, bar and catering takings, receipts from special dinners, functions and other fund raising activities.  There is usually a person or sub-committee appointed who is responsible for the collection of cash on these days.

In these situations, an alternative method of receipting must be adopted. When the person responsible for the collection of the money is satisfied all funds have been received, a standardised form showing the appropriate information along with the money is given to the Treasurer.

This form should show the following information:

• Person in charge
• Type of activity
• Total cash given to Treasurer
• Float received from Treasurer
• Total takings
• Signature of both Treasurer and Person-in-charge
• Discrepancies and reasons for if they occur

Most importantly, receipts taken by the Treasurer must be banked on a regular basis. This must be done at least weekly and whenever possible the day after the event.

The banking should be done intact, meaning the total of the banking should equal the total of all receipts since the last banking. The total of all the receipts should be recorded in the cash book and agreed to the subsequent bank statement. When lodging the cash/cheques with the bank, it is good practice to write the receipt numbers to which the banking relates on the bank deposit sheet. This aids the audit trial of the receipting process.

IMPORTANT: Once cash is receipted, discrepancies are traceable. It is up to the time of receipting that opportunities exist for funds to go missing. It cannot be emphasised enough to issue receipts immediately for all cash received and bank funds as quickly as possible.

Receipts

Details of receipts are recorded in cash book columns. Columns are labelled with the account names (e.g. membership, coaching fees, raffles, bank interest). The columns are often the same as those identified in the income side of a Club's budget or statement of income.

Receipts are usually entered in three places, depending on the amount of detail required and the type of cash book system used. Receipts are entered in the amount column, usually in receipt number order, under its account column, and in the banked column when it is banked. At the end of each month, the cash receipts columns should balance with one another (i.e. the amount column totalled should tally with the total of all other columns, excluding banked, added together). Often the banked figure will be an accumulation of all money received since a deposit was last made. Listing individual amounts by date banked facilitates the bank reconciliation process.

All receipt columns should be totalled at the end of each month. Monthly totals can be accumulated to give a record of receipts for the year to date, overall and for each account (e.g. total for membership). Accumulated totals can be compared to budgeted figures to reveal whether income items are on budget, ahead or behind. When balanced, the monthly closing balances can be carried forward as the opening balances for the next month.

Payments

As with receipts, payments are recorded in cash book columns. Columns are labelled with the account names (e.g. telephone, rent paid, maintenance, bank fees). The columns are often the same as those identified in the expenditure side of a Club's budget or statement of expenditure.

When a cheque is issued, the details should be entered in the appropriate columns, usually in cheque number order. The amount column provides a running total of expenditure for the Club. At the end of each month, the cash payments columns should balance with one another (i.e. amount column totalled should tally with the total of all other columns added together).

All payment columns should be totalled at the end of each month. Monthly totals can be accumulated to give a record of expenses for the year to date, overall and for each account (e.g. total for rent paid). As with receipts, accumulated totals can be compared to budgeted figures to reveal whether expenditure items are on budget, ahead or behind. When balanced, the monthly closing balances can be carried forward as the opening balances for the next month.

Payment entries in a manual or spreadsheet based cash book might look like this:

• Write the payee's name in full
• Write the correct date
• Write the total amount clearly both in words and figures
• Fill in the cheque butt
• Sign the cheque, making sure there are two authorised signatures
• Request a receipt for all payments

Cash based or accrual accounting

The accounting system described in this module is cash based. Cash and accrual accounting are two different accounting standards which use different criteria for recognising income and expenses. Using an accrual based system provides a more accurate record of a Club's financial position and financial performance but involves more work. Revenue and expenditure have to be matched for the period in which they are incurred. Many Clubs, particularly those that are entirely volunteer staffed, do not have sufficient resources to run accrual based accounting systems. They use the cash based system because it is easier to learn and requires less work to keep it up-to-date. Because the cash based system does not routinely track accruals (e.g. prepayments such as insurance, unpaid accounts, or unearned revenue such as membership fees), the management committee may not always have complete financial information. Some Clubs use a modified cash based system in that they record income when it is received, but record expenses whether or not they have been paid.

 Bank reconciliation

Ask your financial institution to send monthly account statements. Try to time these just prior to the monthly Club meeting. Check the statement against your cash book to ensure they are the same. Remember that there are items that may slightly alter the bank balance - interest and charges, unpresented cheques, dishonoured (bounced) cheques, and direct credits or debits from other accounts. A copy of the monthly statement is usually made available for the benefit of the Club's auditor. The bank statement shows all movements of funds in and out of an account. To obtain a clearer picture of the Club's financial position the cash book balance is reconciled against the bank statement.

A reconciliation statement looks something like this:

Bank reconciliation statement

Petty cash

Petty cash is for small amounts paid by cash. A cheque is drawn on the Club account for a small amount and all expenditure from this is recorded and receipts retained. Records of petty cash expenditure should be written in a petty cash book, not the Club cash book. Combined petty cash vouchers and register type books can be purchased from your local newsagency or stationer. Items bought out of petty cash are for small amounts (less than say $100.00).

Clubs normally carry a petty cash float to handle these payments. It is best to calculate how much cash should be kept on hand and kept in a safe place. It is advisable to include the float in your Club's theft insurance policy. Petty cash can be issued in exchange for a receipt as a means of reimbursing Club members who have used their own money to purchase small items.

Payroll

Payroll deals with paying your employees (including seeing that the government gets the monies they require you to withhold from the employees and the payroll taxes they require you to pay).

It is good practice to keep a payroll and pay employees by cheque or direct deposit to their bank account. A payroll summary is an important set of records that should be passed on to the auditor when the annual accounts are being audited. The payroll summary should be kept with the vouchers for the cheques written to pay salaries or wages.

If you have occasional employees, or even one or two full or part-time, you can get by recording the payroll transactions in the General Journal.

Accounting for GST

Financial operations  (pdf - 230 kb)