However, we can also specify that certain expenses are always chargeable to petty cash, even if they’re above $50. Secure the money and record using a lock box or cabinet that can only be opened by the petty fund manager. Store the petty cash fund at the assigned manager’s desk and make copies of records in case of accidental disposal or deletion. Look at the past six months of random expenses to figure out how much money to put into your petty cash fund. Examine the frequency, amount, and source of expenses during this period to determine if it makes sense to split up your petty cash fund by department. If you notice certain items appear often (snacks, parking, etc.), consider allocating a specific amount for these expenses in your company’s formal budget.

This also makes it easy for internal auditors to review petty cash records. ReconciliationReconciliation is the process of comparing account balances to identify any financial inconsistencies, discrepancies, omissions, or even fraud. To set up a petty cash system, the initial amount of money comes from the business checking account. Notice how the far right-hand row lists the current balance of the petty cash fund? This lets you reconcile—that’s fancy accounting speak for “double check”—your petty cash fund on the fly. Small businesses will often record all disbursements in a log and put one person in charge of petty cash to make sure none of the funds go missing. A general ledger is a record-keeping system for a company’s financial data, with debit and credit account records validated by a trial balance.

Petty cash log

The next step is to write a check to petty cash for $200, cash it, and stow it in your cash register or lockbox. Many small businesses don’t have a formal system for petty cash—owners will simply pay out of pocket for small expenses and hope nothing goes wrong. It sure would be nice to have some spare cash around to pay for these small business expenses, wouldn’t it?

• Since the petty cash account is an imprest account, this balance will never change and will remain on the balance sheet at $75, unless management elects to change the petty cash balance.
• Companies, whether large or small, don’t want to lose deductions on their financial statements or lack visibility into where and how resources are spent.
• Although you can fund a petty cash account in any amount, businesses typically set aside enough to cover a one-month period.
• At the time the entry is made, the custodian will receive a $315 check that’s cashed and the money placed in the lockbox.
• Whatever you decide, it’s important that only one person have access to the fund at any time, to avoid unaccounted for withdrawals and/or theft.
• Cash can only be reimbursed by the Controller’s Office when supported by receipts.

Get up and running with free payroll setup, and enjoy free expert support. https://www.bookstime.com/ Whenever possible, local units should use the PCard instead of petty cash.

Step #2 – Assign Responsibility

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Some businesses put $50 into their petty cash fund while others put $250—the amount of your fund depends on your business needs. It can be in the form of actual funds or in the form of items that bring value as they can be sold for cash, such as company equipment and machinery. Petty cash is an asset to the business because it includes a specified amount of cash, which is valuable to a company. Furthermore, petty cash keep a Microsoft Excel doc or other spreadsheets that tracks who spent what, when it was spent, and the total amount of spending for both the month and year to date. Not only will this help you hold employees accountable, it will also ensure you’re more prepared at tax time. However, failing to hold employees accountable for petty cash may encourage theft or inappropriate use of company resources.

Start Logging Your Small Expenses With a Petty Cash Log Template

Each entry in the petty cash book should include the date, the amount, and what was purchased with the petty cash. Review your petty cash register before you replenish the petty cash fund.