Help me understand how to enter Cash Advance in Manager

Could anyone give me suggestions on how to do Cash Advance in Manager?

For example, my worker came to me asking for Cash Advance to purchase stationeries for the inventory and office use. Since we don’t know the exact amount to the purchase, I gave him $500 cash advance. He took the money and purchased a variety of stationeries valued to $350. He came back and returned the remainder $150.

How do you enter the cash advance?
What account do you use to cash out the advance?
How do you enter the returned money?
How do you enter the inventory with the cash advance?

Anything would help me understand the principles of purchasing using the cash advance. Thanks.

This is not cash advance. This is just recording cash expense.

Since you have cash on hand, you should have an account created under Cash accounts tab. Then it’s a matter of recording $350 in Spend money transaction and allocating it to proper expense account.

The suggestion is that we don’t record the $500! Shouldn’t every money out must be recorded? This literally takes me by surprise.

I understand the recording of the $350 inventory at the end. Even if my worker purchased the inventory using his own money, and he came back with the receipts, I reimbursed him accordingly using the Petty Cash and allocated it to the inventory account. This is very straightforward.

But I am struggling to put things together if my worker requested a cash advance for the purchase. Shouldn’t the recording of the $500 is as important as the allocation of the $350? If we don’t record the $500, we might all forget the money already being cash out to a certain person for the purchase. I believe it is a good practice to record the cash advance. Please help me out in this area.

If you are using a petty cash float, then when you give the worker the 500, they sign a IOU for that amount and its kept with the petty cash float. This keeps the petty cash float balanced.
When the worker returns they give you the receipt for 350 plus cash of 150, the IOU is now destroyed.
The petty cash remains balanced. The IOU is the reminder that the cash advance has been given.

Thanks Brucanna.

Do you think the following steps work in Manager?

  1. Issue the Spend Money from the petty cash account and indicate it as IOU.
  2. When he return, edit the payment receipt to balance it and allocate the purchase to the inventory account.

It is generally bad accounting practice to edit past transactions (unless you discover you actually made an error). If some problem turns up later, you have no record of what actually happened. If you do not like @Brucanna’s idea of IOU in the petty cash box (something that is done even by very large companies), then you should create an asset account named something like Petty cash advances and allocate the payment there. Then make another transaction, receiving money to that account when the change is returned. Then you must transfer the portion of the original payment actually spent on stationery to proper expense or inventory accounts. By the time you do all that, filling in a petty cash receipt looks simple. :wink:

Putting any Spend Money entry into Manager requires documented support
By having a signed IOU, there is proof that the advance has been given.

To do your (1) with the (2) follow up almost implies that Manager is being updated instantaneously with the issuing of the cash advance, if that’s how your admin functions - ok. Generally, petty cash documentation and petty cash processing don’t run that tight.

Thanks, Tut & Brucanna. It started to make sense now. Thinking of it, it is quite simple by adding additional steps to the transfer to keep safe the records. All the past years, we have been doing manual handling of the petty cash via Excel. Now we are transitioning to the Manager, and it seems that we have to forgo some of the conventional ideas and think how the software would handle the petty cash.

If you are going to record the Cash Advance in Manager then you only have to do the following two entries.

  1. Giving the Advance
    Petty Cash - Spend Money, Line one - Cash Advance Clearing 500
  2. Returning the Advance
    Petty Cash - Receive Money, Line one - Cash Advance Clearing 500, Line two - Inventory Stationary -350 (note the minus sign in front), this will give the entry a total of 150.

There is absolutely no need to do a separate transfer as detailed above

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Brucanna, how about when the cash advance will be deducted in payroll? I think it could be a double entry and may cause discrepancies.

Not at all, just give the Advance as per 1 above. Then for the repayment via payroll just create a Payroll Deduction item with the account being Cash Advance Clearing, this transaction would be a substitute for 2 above.