What is Petty Cash: Petty Cash is a small amount of money on hand that is used to pay for small items such as postage stamps, reimbursing an employee for office supplies purchased, transportation expenses like parking or tolls and beverages and sweets for business meetings etc.
Do You Need A Petty Cash Fund: If you reimburse your staff for small expenses like taxi’s or parking, have COD’s and purchase drinks and treats for meetings on a regular basis then your business could benefit from a Petty Cash fund.
To find out How Much Money Should Be In The Petty Cash and Who Is Responsible For The Petty Cash
How Much Money Should Be In The Petty Cash: The amount of money in a petty cash fund will be different for every business. Some businesses can be as low as $50.00 while others may need $200.00 or even more in a month. If you are new to a Petty Cash Fund, start small, you can always increase the value based on expenses. Always make sure to keep receipts for all purchases and balance the Petty Cash each week.
Who Is Responsible For The Petty Cash: You should designate 1 employee to be in charge of the petty cash fund. This person is known as the “Petty Cash Custodian”. The petty cash should also be locked away and the only keys should be with the employer and the “Petty Cash Custodian”.
Make sure to record the petty cash in your accounting software. Create a petty cash account in the asset section of the chart of accounts then create your initial entry – Figure 1. At the end of the month you need to replenish your petty cash fund – Figure 2. Record the expenses associated with the petty cash receipts submitted – Figure 3.