Common things petty cash is used for include buying office supplies, paying for small maintenance jobs, or covering parking fees. Keeping good records makes sure the money is being used for legitimate business needs. The petty cashier hands over the money, fills out a petty https://www.bookstime.com/ cash voucher and requests the employee to submit a receipt or proof in return. The petty cash balance is present on the company balance sheet with cash in the bank and cash on hand.
Best practices for managing petty cash
When the person returns with a receipt, attach it to a petty cash voucher and file it sequentially. Number each voucher to match your log entries—this numbering system makes monthly reconciliation much simpler. If someone loses a receipt, require a written explanation signed by both the employee and their supervisor. Keep the log with the cash box, and require entries before money changes hands.
Petty Cash: What It Is, How It’s Used and Accounted For, Examples (
- It’s important to create a system for tracking expenses and replenishing the petty cash fund.
- Before handing over cash, your custodian should complete the log entry and have the recipient sign for the money.
- For example, anyone who requires such cash should be required to write their name, the date, time, and the specific amount and description of the transaction.
- Whenever a small amount is utilized to settle expenses, it must be replenished.
- To enforce these controls, companies typically assign a small number of individuals—often called petty cashiers—to manage and approve petty cash disbursements.
This person should understand the define petty cash importance of keeping accurate records and demonstrate integrity in handling company resources. It’s best if the custodian is not involved in the accounting or bookkeeping process to ensure a separation of duties, thus mitigating any temptation or opportunity for misappropriation. Journal entries are only recorded when the custodian requests more cash, not when purchases are made with petty cash.
- It helps prevent errors, detects misuse, and keeps the petty cash fund balanced with proper records.
- The petty cash custodian is responsible for managing the petty cash fund.
- Think your colleague’s birthday cake, taxi fares for urgent meetings, refreshments for staff or clients, or postage for last-minute mailings.
- The next step is to write a check to petty cash for $200, cash it, and stow it in your cash register or lockbox.
- Make sure everyone with access to petty cash funds knows what they’re for, and provide some examples of typical petty cash expenses to make sure there’s no confusion.
What Is Smart Expense Management? Meaning & Key Benefits
For every disbursement, ensure completion of a voucher or receipt detailing the amount, the date, and the specific purpose of the expense. To facilitate transparent reimbursement, attach the corresponding proof of purchase to the voucher post-expenditure. The petty cash custodian should verify all details rigorously, confirming the expense’s alignment with acceptable petty cash uses before the release of funds. This systematic approach to cash disbursements safeguards against financial discrepancies, maintaining the integrity of your petty cash fund.
Balancing the petty cash account usually occurs when the fund needs to be replenished. The petty cash custodian brings all the slips or vouchers to the business’ bookkeeper, cashier, or accountant. The petty cash receipts are logged into the company’s General retained earnings Ledger as credits to the petty cash account, and probably debits to several different expense accounts. When the petty cash fund is replenished, usually by drawing on a company-issued check, it’s recorded as a debit to the petty cash account and a credit to the cash account. When a petty cash fund is in use, petty cash transactions are still recorded on financial statements.
This voucher includes details such as the date, amount, and purpose of the expenditure. The purchases made with petty cash become expenses when recorded during replenishment. Prepaid business debit cards provide petty cash convenience with digital tracking. Load a set amount monthly, distribute cards to authorized employees, and monitor spending in real time through online portals. Every transaction creates an automatic record, eliminating manual logs and lost receipts. From an accounting perspective, petty cash is a current asset with a normal debit balance.