Petty Cash Policy And Procedures

Such controls are necessary to prevent any further fraud from occurring. Receipts and spending should be reconciled before the funds are replenished. A custodian takes care of the transactions done in petty paper money. Paper MoneyPaper money is a country’s currency in banknotes that have a specific value and pay for goods and services. Paper money holds a country’s government backing while the central bank controls the note’s printing and circulation. The petty cash daybook is one of the daybooks used in bookkeeping and the double-entry bookkeeping system.

Funds are audited by FAS quarterly and may be audited at any time by internal & external auditors. Ustodian when a decision is made regarding the establishment of a new fund. Custodians must be regular Boston University employees. Ustodians must be documented on a Petty Cash Action Form and approved by an authorized signer.

Related To Petty Cash Policies

We will not use the petty cash in a journal entry again unless we are changing this original amount. As expenditures are made, the custodian of the fund will reimburse employees and receive a petty cash voucher with a receipt/invoice attached in return.

Once approval is submitted todecreaseyour petty cash/cash drawer, complete an Advanced Deposit e-doc and deposit the cash on hand. With this solution, petty cash reconciliations follow an automated workflow that ensures proper review and approval of account data, and maintains appropriate segregation of duties. When discrepancies are identified in petty cash funds, the product automates the workflow for their review by accountants. Also under the imprest system, a balance is predetermined for the petty cash fund.

Free Accounting Courses

In the journal entry below, the vouchers total $130 but the fund needs $135, so the entry includes a $5 debit to the cash over and short account. The purpose of a petty cash fund is to provide cash to business units sufficient to cover minor expenditures. The use of petty cash funds should be limited to reimbursement of staff members and visitors for small expenses, generally not to exceed $50, such as taxi fares, postage, office supplies, etc. Wherever possible, local units should use the PCard instead of petty cash. General LedgeA general ledger is an accounting record that compiles every financial transaction of a firm to provide accurate entries for financial statements.

These will provide detailed vendor or cash register receipts, which itemize the item or service purchased, the date, and the amount. Managers have trouble controlling how petty cash is spent. Bookkeepers devote far too much time to processing it.

How To Account For Petty Cash

A reconciliation of the petty cash fund/cash drawer should be completed and reviewed by the custodian’s supervisor periodically. Petty Cash funds may be established for payment of minor or infrequent expenses where it is otherwise impractical to obtain a university check or use a procurement card. BlackLine Account Reconciliations manages and reconciles all petty cash accounts via a centralized system. Templates for recording account data with customizable checklists ensure standardized petty cash records across the organization. Regular tallies of the funds, verification of receipts and vouchers, and reconciliation of expenditures will ensure compliance with company policies and minimize discrepancies in the balance sheet. The petty cash balance should be sufficient to support the amount of activity expected in the account, and will typically be a reflection of the size of the company.

It is the sole responsibility of the department to ensure that the funds are secured at all times. Reconciliation of the petty cash fund should be done periodically to ensure that the fund’s balance is correct.

What Is Petty Cash?

Receipts should be given for all payments from petty cash. The receipts should contain the date, name of individual receiving cash, amount of cash and business purpose. Once the cash has been released to the petty cash fund, you will want to secure it, most likely in a lock box, safe, or a locked drawer or file cabinet.

On the DV, use payment reason “K” payble to the custodian of the petty cash account using vendor type Petty Cash Custodian. You must attach copies of the receipts with the DV.

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The Cash Receipt total plus the total disbursement must equal the original Petty Cash fund amount. Petty Cash funds may not be used to purchase food and beverages. Refer to the Food & Beverage Overview webpage for purchasing procedures. Receipts must correspond to the description of the petty cash ticket and account number designated on the ticket. The custodian is responsible for obtaining the original receipt for each transaction. A cash flow Statement contains information on how much cash a company generated and used during a given period. If there are receipts that need to be credited against the account, prepare a Distribution of Income and Expense e-doc, and attach the receipts as backup.

• The transaction that replenishes the petty cash fund is recorded with a compound entry that debits all relevant asset or expense accounts and credits cash.
• By assigning the responsibility for the fund to one individual, the company has internal control over the cash in the fund.
• If you do, that employee is called the fund or account custodian.
• Sometimes, the petty cash custodian makes errors in making change from the fund or doesn’t receive correct amounts back from users.
• If you have more than one employee, you could delegate managing the account.
• If you’re a small business owner, it’s important to understand how petty cash can be used so you can account for it correctly in your books.

The balance in the petty cash account should now be the same as the amount at which it started. 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.

That employee could be reimbursed later using petty cash, or you could give them money from petty cash and have them bring you the change and receipt. DebitCreditPetty Cash400Cash400To increase the size of the petty cash fund by $400.A company may feel it is time to close the petty cash fund. To illustrate, we will close the $100 original petty cash fund by returning the cash to the checking account with a debit to cash and a credit to petty cash. Usually one individual, called the petty cash custodian or cashier, is responsible for the control of the petty cash fund and documenting the disbursements made from the fund. By assigning the responsibility for the fund to one individual, the company has internal control over the cash in the fund.

The First Known Use Of Petty Cash Was In 1715

See the instructions at Set Up and Manage Accounts. https://www.bookstime.com/ is the most liquid asset of an organization and is easily misappropriated if business processes and controls are not established. With petty cash on hand, there is an increased tendency to spend the money freely without attention to detail. This lack of attention can lead to a missing or inadequate paper trail, and sometimes fraud or theft. Having cash in a lock box creates a unique set of challenges, which demands an effective cash management system. In addition to a log, your company’s policies should include a requirement for receipts to be provided for every purchase.

However, in limited circumstances when a need is established and documented a small departmental petty cash fund may be approved. The purpose of this policy is to establish the criteria by which petty cash funds will be established and approved, and to provide guidance on proper management of those funds. DebitCreditPetty Cash100Cash100To establish a petty cash fund.After the check is cashed, the petty cash custodian normally places the money in a small box that can be locked.

The custodian should be a competent, trustworthy employee in the organization. Handing employees money rather a credit card with access to a credit line might seem like a better option – but both solutions are fraught with difficulty.

Closing A Petty Cash Fund

You might even enter the names of employees who request funds and why they may need them—it might indicate an expense you weren’t aware of. Require that receipts and exact change are stored with the funds after purchases have been made. You may only be reimbursed if your department does not have a petty cash fund. In KFS, a distinction is made between Petty Cash accounts and Cash in Drawer accounts. Prior to KFS, both petty cash and cash in drawer were considered petty cash. Complete an account edit in KFS to close the petty cash/cash drawer account.

Finance sees it as a cash drain, since they have to budget for more than they’ve projected in order to cover expenses in the field. And for larger expenses — travel, in particular — it’s hopelessly inefficient. Your employees need petty cash to make necessary outside purchases, but they have to jump through hoops to deal with it.