Properly Recording and Managing Petty Cash

Properly Recording and Managing Petty Cash

Petty cash funds can be used to cover small expenses or reimbursements, typically under $25.

Petty cash is a small amount of cash kept on hand to cover expenses that are too small to bother with writing a check.

Whenever a transaction is made, fill out a petty cash voucher or receipt for your record keeping. You can then enter it into your company’s accounting system.┬áTo record petty cash expenses: credit the petty cash fund and debit the respective expense accounts. To replenish the fund, credit the checking account when the cash is drawn, and debit the petty cash fund to bring the amount back up to standard.

When your petty cash fund is low, or at a regularly scheduled period (once a month), write and cash a check from your company’s checking account to replenish the fund. If you find the fund running low too often, you may need to reevaluate how much petty cash is kept on hand.

Maintaining and properly recording the petty cash account is important because it will allow the company to take the deductions for the expenses, but proper controls should also be put into place to prevent fraud or theft.

You should have a designated spot, drawer, or safe for your petty cash fund and designate responsible parties. If possible, have one person responsible for disbursing cash for expenses and reimbursements, and the other responsible for replenishing the fund. Make sure to reconcile the petty cash regularly in order to ensure that all expenses are properly accounted for.

 

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