Reviewed by Vineeth Updated on Nov 11, Petty cash is a nominal sum which is preserved in hand to cover minor expenses, such as reimbursements or other office-related expenses. Like other funds, petty cash will also be subject to regular reconciliations, with every transaction being recorded in the official statements and other records. Almost every department of a large corporation maintains petty cash in a drawer, small box, or other similar containers.
The presence of petty cash provides the much-needed flexibility for doing small transactions for which handing out a demand draft or a bank cheque seems illogical. The nominal amount stored in the form of cash which an organisation deems petty will vary across companies.
However, most organisations maintain a petty cash reserve in the range of Rs 5, to Rs 20, The following are some of the transactions for which petty cash is made use of:. Each department would have appointed an executive to look after the transactions of the petty cash reserve. The duty of custody of petty cash involves enforcing the rules set to make use of petty cash, disbursing, and reimbursing petty cash on a regular basis.
Even though petty cash is a nominal sum, the transactions made using petty cash is still recorded in the financial statements of the organisation. What is petty cash? Login to add to your reading list. How should I manage petty cash? Who is allowed to spend petty cash? What it can be spent on? How to keep track of it?
How often should I reconcile it? Previous Slide Next Slide. What is a petty cash book? Fields in your petty cash book should typically show: purchases date of purchase amount of purchase.
Find out more. Download: Petty cash log You can record your daily petty cash receipts and payments in an Excel document. Download: Please login or register to get your download. What records should I keep? How do I keep my petty cash safe?
It is important that you have tight controls over petty cash. End of Article. Share this content. Visit partner's website. Please verify that the email is valid and try again. There was a problem connecting. Please try again. Looking for a different set of features or lower price point?
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Are you ready to set up petty cash for your business? We may receive compensation from partners and advertisers whose products appear here. Compensation may impact where products are placed on our site, but editorial opinions, scores, and reviews are independent from, and never influenced by, any advertiser or partner. Your postage machine just stopped working, and you need to send one of your employees to the post office fast to get some stamps. The only problem is she has no cash and her credit card is maxed out.
Petty cash is the money you keep on hand in your business to pay for small expenses such as emergency trips to the post office, beverages for unexpected visitors, or to reimburse your receptionist for picking up donuts for the staff meeting this morning. Petty cash is the money a business keeps on hand to pay for miscellaneous purchases. Most purchases made with petty cash are unexpected expenses that can pop up, such as morning coffee for a meeting or dinner for an employee working overtime.
One of the main reasons to have petty cash on hand is to quickly reimburse employees who have spent their own money on items for the business or to tip the delivery service driver who brought the office lunch. Petty cash, like any other expenditure, needs to be accounted for properly in your accounting software or manual accounting system since the expenses are business related and need to be properly recorded to ensure financial statement accuracy.
On her way to the office, Jane receives a phone call from her boss asking her to stop and pick up some donuts for an unexpected meeting later that morning. To begin, have a secure place to store your petty cash funds, such as a lockbox or locked drawer.
If you only have a few employees, fund management may fall to you. The petty cash log is one of the most important components of managing petty cash. Any transactions made into or out of petty cash need to be recorded on the petty cash log.
For example, for Jane to get reimbursed for the donuts she purchased for the meeting, she needs to provide a receipt. The receipt will be used later as back up for recording the petty cash transaction as an expense in your general ledger.
The petty cash log should include the date, details of the transaction, the cash you put into petty cash, the amount distributed, and a running balance.
Your available cash should always match the amount recorded in your petty cash log. To record the petty cash transactions for August, you would need to record the expenses as a journal entry. If you find yourself going through petty cash rapidly, you can increase the amount of petty cash you keep on hand. If you decide to set up a petty cash fund for your small business , there are a few things you can do to ensure that it runs smoothly, such as creating a petty cash policy that outlines what petty cash can be used for as well as any maximum spending amounts.
Anything over that amount would be paid for or reimbursed using other means. Making sure that any expense you reimburse has a receipt is also helpful. While a petty cash fund may not be necessary if you work solo, if you have even one employee, it may be worth it to set up a petty cash fund to manage those unexpected expenses properly.
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