Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger current asset account that reports the amount of the company’s petty cash. The amount of petty cash will vary by company and may be in the range of $30 to $300. A petty cashier might be assigned to issue the check to fund the petty cash drawer and make the appropriate accounting entries.
What does petty cash mean?
Petty cash is a small amount of money kept on hand for small purchases or expenses. It is typically kept in a locked box or other secure location and is often used to pay for minor office supplies, postage, or travel expenses. Typically, a petty cash fund is established and then a custodian is assigned to manage it.
There are hundreds of small, infrequent things that petty cash can be used for, and each company will have its own rules for their authorized use. Common purchases include items such as postage stamps, delivery fees, tips, tolls, parking fees, paper, pens, toner cartridges, and projector light bulbs. The petty cash custodian will keep track of its usage and notify the proper company officials when the account is low and needs to be replenished – which typically happens every few weeks.
Petty cash best practices
The reconciliation process ensures that the fund’s remaining balance equals the difference between the original balance minus charges detailed on receipts and invoices. If the remaining balance is less than what it should be, there is a shortage. If the remaining balance is more than what it should be, there is an overage. Although there can be minor variances, when unbalanced, the source of the discrepancy should be identified and corrected.
- It would take way too much time and may not even remedy the problem because the candy machine does not accept checks.
- Petty cash uses and balances should be recorded, and receipts should be reconciled so you can balance your ledger and replenish the fund for other expenses.
- Finally, be sure to choose a responsible person to manage the petty cash fund.
- Business purpose and description of purchase When the cash fund becomes depleted, complete a Petty Cash Reimbursement Form and submit to Accounts Payable.
- Petty cash is typically kept in a locked box or drawer and is only accessed by one person, who is responsible for maintaining it.
Whenever possible, local units should use the PCard instead of petty cash. It seems a very large amount of petty cash, if that is really what it is. It is important to bear in mind an interesting addition to the petty cash of the private builder before the war. I think that there ought to be no slacking of our efforts in regard to this matter, and no petty cash savings.
How Do You Balance Petty Cash in Accounting?
Petty cash, or petty cash fund, is cash that is used for a business’s small, miscellaneous expenses; rather using a check or other form of payment. Petty Cash custodians are responsible for safeguarding petty cash definition petty cash funds and Maintaining receipts and detailed records to support all transactions. At the time of the audit, the petty cash custodian must provide a full accounting of the fund.
Paper money holds a country’s government backing while the central bank controls the note’s printing and circulation. ExpensesAn expense is a cost incurred in completing any transaction by an organization, leading to either revenue generation creation of the asset, change in liability, or raising capital. When such a petty amount is utilized to settle expenses, it needs to be replenished. A cash advance is a service provided by credit card issuers that allows cardholders to immediately withdraw a sum of cash, often at a high interest rate. This figure should be the same as the withdrawn sum you calculated from the account starting and ending balances. And the amount of cash you have in your storage box or drawer should be the same as the current balance of the account.
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It is still very likely that there is a process to get funds from the Petty Cash Custodian, but they are often much easier than the normal process. The Petty Cash fund will usually provide reimbursements for small office expenses as long as the purchaser is able to supply the custodian with a receipt documenting the purpose and amount paid. Enforcing petty cash policies and procedures, obtaining replenishments, and allocating funds are all typically part of the custodial responsibilities. Petty cash uses and balances should be recorded, and receipts should be reconciled so you can balance your ledger and replenish the fund for other expenses. Petty cash is used by businesses to simplify the reimbursement process for employees who have made minor business purchases.
What is an example of petty cash?
Petty cash is cash that is kept on the company premises by a company, it is normally a small amount kept for covering minor purchases. Larger amounts of cash will be kept in the company's bank account. Minor expense examples are office supplies, reimbursements, postage expenses, highway tolls etc.