petty cash funds are useful alternatives to writing checks or using your business credit card to cover small expenses. Petty cash funds are used to purchase items for your business, reimburse employees who purchased business items, or to make change. You typically evaluate your petty cash fund at the end of each month for more accurate balances. Remember to record petty cash expenses in your accounts as journal entries. A designated employee, the petty cash custodian, accounts for your business’s use of petty cash. When an employee takes money from the petty cash fund, the petty cash custodian must record who took the money, the amount taken, what the money is for, and the date. Read on to learn about establishing a petty cash fund, handling petty cash accounting, reconciling your petty cash account, and claiming a tax deduction.

Like any other type of transaction, you must record petty cash transactions in your small business accounting books. Your petty cash custodian should be the only employee distributing petty cash. Your petty cash custodian determines if the expense is appropriate according to your business’s petty cash policy.

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At this time, the total of all of the receipts is calculated to ensure that it matches the disbursed funds from the petty cash drawer. If new funds are needed, the cashier writes a new check to fund the petty cash drawer and takes, in exchange, the receipts from the purchases that depleted the cash. DateAccountNotesDebitCreditXX/XX/XXXXPetty CashAdding to petty cash accountXCashXWhen the petty cash fund gets too low, you must refill it to its set amount.

The receipts should show the date, recipient, purpose, and amount of each cash disbursement. These receipts must be signed by the person receiving the money, stamps, etc. The receipts should be perforated or canceled by some other appropriate means to prevent reuse. At the time of replenishment, the custodian should ensure that the balance remaining in petty cash, together with the amount of the replenishment voucher, equals the authorized balance. A petty cash custodian should be designated to safeguard and make payments from this fund.

Establishing Internal Controls for Petty Cash Funds

The English word “petty” derives from the French petit, which means “small” or “little.” Likewise, “petty” means minor or insignificant. So https://www.bookstime.com/ refers to a small sum of money set aside for trifling or little purchases, as opposed to major expenses or bills. 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. Avoid delays when making urgent purchases like catering for meetings. Transfer money to cards instantly, or set up low-balance top-ups so cards never run out of funds. Issue physical cards to teams and groups, as well as individuals.

• Petty cash funds are used to purchase items for your business, reimburse employees who purchased business items, or to make change.
• BlackLine solutions address the traditional manual processes that are performed by accountants outside the ERP, often in spreadsheets.
• BlackLine’s foundation for modern accounting creates a streamlined and automated close.
• Petty cash funds must be closed out and reconciled at the end of each fiscal year.
• Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check.
• 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.