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Petty cash Definition & Meaning

what is petty cash

Access to the Safe should be limited to authorized employees. A petty cash fund is initiated by a Department Head’s request, in writing through the Controller, with final approval of the Vice-President of Finance. After Physical Plant has secured this box in a locking desk or file cabinet, the Controllers Office is notified and a numbered receipt book is issued. Finally, the cash fund is distributed through the Controller’s Office. Without prior notice, petty cash funds are subject to audit, by either the Internal Auditor and/or the Controller’s Office, to the amount of the established fund.

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. Petty cash is a store of money kept in an office to be used on various office expenditures.

Financial Services

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. ReconciliationReconciliation is the process of comparing account balances to identify any financial inconsistencies, discrepancies, omissions, or even fraud. At the end of any accounting period, reconciliation involves matching balances and ensuring that debits from one account for one transaction is same as the credit to another account for the same transaction. The frequency at which petty cash is withdrawn differs hugely from organization to organization.

Not surprisingly, petty cash funds are vulnerable to misuse and could even lead to outright fraud. Petty cash is a relatively small amount of cash on hand available for employees of a business to make small, non-recurring purchases easily and quickly. Since our founding in 2001, BlackLine has become a leading provider of cloud software that automates and controls critical accounting processes. Understand customer data and performance behaviors to minimize the risk of bad debt and the impact of late payments.

Petty cash accounting

See Procedure 4-005, Preparation of Petty Cash Voucher, for detailed instructions and requirements. Petty cash expenditures are subject to all USNH and campus policies, procedures and practices relative to proper expenses, authorization, accounting and documentation. Note that there generally must be an original sales slip, cash register tape, or other receipt attached to the Petty Cash Voucher for each expenditure. However, an employee may not approve his or her own expenses. When the fund needs replenishing, the Petty Cashier summarizes all expenditures, including payee, purpose, account number and amount on the “Petty Cash Replenishment Request”. The sum of all invoices and petty cash vouchers must equal the total of the summarized expenditures.

It is the best mode of payment in situations in which paying by check seems an insensible option. Normally, such an amount that a company can spend on the daily expenditures varies between $50 and $500. Petty cash reconciliation is required to be done at regular intervals to make sure the fund balance is correct. what is petty cash The custodian has to get the total of all the receipts to make sure that the resulting figure matches the amount taken out from the office drawer. In case a new fund is required, cashiers can write a new check. The journal entries are made when the custodian receives new funds in exchange for the receipts.

Alternatives to Petty Cash

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Petty cash can have a variety of uses depending on your industry. You set your own rules about which expenses can be reimbursed and how much the petty cash account can cover. Initially, you may need to adjust the petty cash fund amount you’ve selected as a cap; over time, you’ll figure out the best level to set it at. For example, say your small business provides specific services for local business owners. Another business owner walks into your office at 10 a.m., and you decide you need some refreshments for the meeting. So you ask an employee who doesn’t normally make business purchases to pick up the refreshments.

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