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5 44 Petty Cash Funds

what is petty cash

In this case, the surplus petty cash should be taken from the fund and deposited in the company bank account. When the check is cashed, the funds will be added to petty cash so that its original level is restored. 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. Petty cash is the money that a business or company keeps on hand to make small payments, purchases, and reimbursements.

Bench gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. We’re here to take the guesswork out of running your own business—for good. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements every month. Petty cash is simply any physical cash your business keeps on hand to pay for small, unplanned expenses.

what is petty cash

You should regularly review receipt records to ensure petty cash is being dispensed only when necessary. Departments may establish a petty cash fund when cash on hand is needed, on a revolving basis, for the payment of small recurring expenses of $100 or less.

Why Is Petty Cash Important?

This is the only amount of cash that is not immediately deposited in the bank account after it is received. Since companies have to safeguard cash from theft and fraud,internal controlsin place to make sure employees and other people can’t steal it.

  • A Petty Cash withdrawal request must be prepared for each reimbursement requested.
  • Examples of the items that may be paid for from the petty cash fund are flowers, food, office postage, presents, supplies, and taxi charges.
  • The amount of petty cash a company has on hand depends on the size and nature of the business.
  • Petty cash fund custodians are appointed to oversee the fund.
  • Petty cash should be maintained on an imprest basis, which means that the amount of the petty cash fund should remain constant.
  • Every once in a while, compare the petty cash balance recorded in your petty cash log with the actual remaining amount of cash in your lockbox.

While assigning a custodian to manage a petty cash fund increases accountability, it also has risks. The custodian should be a competent, trustworthy employee in the organization. When the fund gets low, e.g. $20 remaining, the custodian requests a top up and submits the vouchers for reimbursement. Assuming the vouchers add up to $80, an $80 top up cheque is issued and an $80 debit towards office expenses is recorded. Once the cheque is cashed, the custodian again has cash at the original amount of $100.

Petty Cash Dos And Donts

When the account goes below a certain specified amount, the system is replenished. Reimbursement for petty cash must be for the exact amount of the expense. Splitting one transaction in excess of $100 into several parts, or requesting reimbursement of less than the full amount of the expense is specifically not allowed. This approach reduces the risk, and since there will be almost no cash balance with the company, few costs concerning insurance and protection of money can be avoided. In almost every organization, petty cash is an integral part of the accounting function and mostly taken care of by accounts personal only.

Can you claim petty cash?

Payments from a petty cash float should be supported by a receipt or voucher and should be recorded on the petty cash imprest account form. Claims for reimbursement of minor travel and subsistence must comply with University regulations for travel expenses, even though payment is made through the Petty Cash float.

The custodian is responsible for maintaining a petty cash payment log and receipts for every transaction. The custodian is responsible for keeping the petty cash funds in a safe place such as a lockable box only to be accessed when needed. Even though the petty cash account is small, it needs oversight. When the custodian disburses money from the petty cash fund, he or she will write out a petty cash receipt which will be signed by the employee who is receiving the funds.

Start Logging Your Small Expenses With A Petty Cash Log Template

Petty cash can also work for frequent but mundane expenses, like milk for the office fridge, stamps, or cleaning supplies. This way, any transaction above the what is petty cash limit can be handled through the normal purchasing process as an account payable. It’s quite easy to head to an office supply store and buy a metal lockbox.

Always make sure that the custodian replenishes the fund when it is getting low – making sure, of course, that you know where and how that money has been spent. The Internal Revenue Service recommends filing out petty cash slips and attaching them to receipts to record and document petty cash expenses. Petty cash is a nominal amount of money readily accessible for paying expenses too small to merit writing a check or using a credit card. While petty cash might seem like a small job, it’s quite important.

what is petty cash

For example, if you have decided on a petty cash fund for $100, your petty cash account book entry will show a debit of $100 to your petty cash fund and a credit of $100 to your bank account. A petty cash fund is a small amount of bills and coins that an organization keeps trial balance on the premises to pay for minor expenditures. A petty cash custodian is responsible for this fund, and maintains an up-to-date reconciliation of the amount of bills and coins remaining in it. The fund is typically replenished by the accounting department once a month.


Reimbursement requests must be signed by the custodian of record and the Principal Investigator or Account Executive . Separate duties, so the person who is recording transactions is different from the person putting the transactions into your accounting system. Necessary and reasonable food (e.g., sandwiches and beverages) brought into the office for business meetings, totaling $100 or less, including tax, delivery and tip. Tea and snacks1,256/-Toll Tax2,450/-Printing & postage1,550/-Freight2,300/-Cleaning and Dusting1,000/-Office Supplies2,800/-Pass journal entries for the above transaction. With one bold stroke, you can get unprecedented control over your expenses, eliminating the inefficiencies, and sharply reducing mistakes and fraudulent spending. Your employees are relieved of annoying paperwork, burdensome reimbursement procedures, and the feeling that their actions are somehow under suspicion.

The petty cash fund is established as a pre-designated, fixed amount, which often ranges from $30 to $300, depending on the business. When this pre-designated amount runs low, the fund is replenished. Start by deciding how much money you will need each day, both to make change for customers and to make small cash payments.

How does a petty cash float work?

Such payments are generally handled by a petty cash imprest system whereby an amount of ‘Float’ is fixed. This is the maximum amount of cash that can be held at any time. … The amount of reimbursement is equal to the expenses paid through petty cash since the time of last reimbursement.

Small businesses might have just $50 while larger ones may have up to $500, or even more. Hitchcock was quick to add he didn’t see the cash exchange hands, but he doesn’t doubt it happened. The person signing to approve the form must have signature authority on the Fund / Org listed. The Controller’s Office will conduct training sessions on What is bookkeeping the operation of Petty Cash funds by request as needed and for all new custodians. Payments for meal money and similar subsistence allowances to employees or students. Reimbursement of an expenditures by a clerical, maintenance or similar level employee. A Petty Cash withdrawal request must be prepared for each reimbursement requested.

Accounting Issues

Here’s how you can set up an effective, easy-to-manage petty cash system. Commercial transactions are increasingly cashless—even at small retailers and restaurants, where purchases traditionally have relied heavily on coins. By having a petty cash cashier and a petty cash custodian, the dual-process helps to keep the funds secure and ensure that only those authorized have access to it. A petty cash fund will undergo periodic reconciliations, with transactions also recorded on the financial statements. In larger corporations, each department might have its own petty cash fund.

Keep the petty cash box in a secure location, known only to one or two people. Therefore, it is appropriate to keep only enough petty cash available for emergency and convenience needs.

But cash on hand has a larger meaning, as an accounting term. In the financial world, it also refers to a company’s highly liquid assets—funds in checking or other bank accounts, money market funds, short-term debt instruments, or other cash equivalents.

If you use accrual accounting, the top-up may be credited from accounts payable instead of cash. It might be tempting to wing it for as long as you can, but setting up a proper petty cash system early is crucial. When fraudulent activity is identified, BlackLine Task Management automates workflow tasks to ensure proper internal controls are enacted to prevent any future fraud from occurring. Reimbursing an interview candidate who needed to pay for parking? Whenever possible, local units should use the PCard instead of petty cash.

What Is An Example Of Petty Cash?

Regular tallies of the funds, verification of receipts and vouchers, and reconciliation of expenditures will ensure compliance with company policies and minimize discrepancies in the balance sheet. In addition to a log, your company’s policies should include a requirement for receipts to be provided for every purchase. These will provide detailed vendor or cash register receipts, which itemize the item or service purchased, the date, and the amount. However, on corporate financial statements, petty cash is listed in the “Cash and cash equivalents” section of the balance sheet. It’s a good idea to mix up how much you have stored in the box. Now that you know why petty cash is so important, here are some important steps you can follow right away to keep track of petty cash for your business.

At the same time, few receipts need to be settled in cash, such as scrap sales, etc. Petty cash is a store of money kept in an office to be used on various office expenditures. The problems with petty cash are largely embodied in its name. It might seem tedious to log every tiny expense in this way, but there’s nothing petty about petty cash expenses.

Author: Billie Anne Grigg

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