How To Set Up and Manage a Petty Cash Account

How To Set Up and Manage a Petty Cash Account

What does it mean to replenish the petty cash fund?

Consider recording petty cash transactions in your books at least once per month. The employee in charge of the petty cash funds would also be responsible for issuing a replenishment order. The replenishment process starts by reviewing the expenses that were made and paid with the petty cash. Then additional cash is added to the petty cash box to increase the balance to the pre-established balance.

What is the meaning of replenish ‘?

transitive verb. : to fill or build up again. replenish a supply of fuel. … London's population was continually being replenished with recruits from the countryside …

Size of a Petty Cash Fund – A petty cash fund should be a small enough amount to require replenishment at least once a month. This allows the petty cash expenses to appear on monthly Banner expenditure reports for the correct fiscal period. On the other hand, the amount should be large enough so that replenishment will not be needed more than twice a month. In no case will a petty cash fund be established in an amount exceeding $1,000 unless specifically approved by the USNH Controller. A petty cash fund will undergo periodic reconciliations, with transactions also recorded on the financial statements. In larger corporations, each department might have its own petty cash fund.

Instructions for Replenishing a Petty Cash Fund

After entering all expenses, it’s time to record the replenishment. First, click Add Deposit then fill out all the required information. Heather needs a $315 reimbursement to bring the petty cash balance back to $500.

What does it mean to replenish the petty cash fund?

In those circumstances when a receipt cannot be obtained, a “Lost Receipt Affidavit” must be completed which identifies the nature of the transaction and is signed by the Department Head. For making a statement of cash flows, you need an income statement, retained earnings statement, and a balance sheet. Immaterial financing activities that affect cash do not need to be included in a statement of cash flows. While calculating the cash payments for budgeted selling and administrative expenses, non-cash expenses like depreciation are also considered. Umair Dankanotes that there’s a significant risk of petty cash being spent on non-business activities. To combat this, make sure your employees understand upfront what petty cash can and can’t be spent on. Keeping a small amount of cash in your office or at your store makes it much easier for office managers, bookkeepers, and supervisors to cover occasional small purchases or expenses.

Cash Over/Short

As such, we’ll show you how to do petty cash accounting manually and how QuickBooks Online can simplify and speed up petty cash accounting. What does it mean to replenish the petty cash fund? You can deduct some petty cash purchases from your business taxes if you have the proper records to support your claims.

  • A check is then written to the custodian of the petty cash fund in the amount of the expenses that were recorded in the general ledger as supported by the receipts.
  • Readers should verify statements before relying on them.
  • Every time you replenish your fund, look over the spending log to see where the money’s going.
  • These errors cause the cash in the fund to be more or less than the amount of the fund less the total vouchers.
  • Petty cash will be estimated based on the company’s weekly or monthly cash requirements.

And the amount of cash you have in your storage box or drawer should be the same as the current balance of the account. While it shouldn’t be a habitual practice, petty cash in a pinch can be used to make change for customers, if the till’s running short. Petty cash can also work for frequent but mundane expenses, like milk for the office fridge, stamps, or cleaning supplies. For example, the company has a delivery coming in at the end of the week. The overseer updates the petty cash with cash earlier the week to ensure that the delivery fees can be paid. Petty cash as needed — Smaller companies have a policy where they will only withdraw petty cash when they need it. A limit could be set to the fund that the overseer is not allowed to exceed without approval from management.

Petty cash do’s and don’ts

If there are any odd transactions or the numbers don’t add up, you could be looking at theft. In this case, you might want to consider installing a camera or taking away access until you figure out who’s stealing. Furthermore, 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. A monitoring and tracking system, with receipts, should be used for the petty cash fund. Debit balance on the Cash Over and Short account represents a shortage , whereas a credit means an overage . A shortage may result from an error (e.g., mistake in calculating change), a receipt not provided by a vendor/employee, or theft.

  • Receipts should be attached to the memo sent to the Controller’s Office, which includes the departmental account to be charged.
  • By establishing a petty cash fund, a department or unit which normally incurs a large volume of minor expenses may realize a significant reduction in administrative work.
  • They’re also responsible for the safekeeping of the physical cash and possess the key to the lockbox where the cash and receipts are kept.

This should be small enough that employees won’t be tempted to steal it but large enough that you don’t have to replenish it too often. Pick a dollar amount you think will cover small office expenses for a month or so. A petty cash fund between $100 and $500 is sufficient for many small businesses. Most businesses have a petty cash process in place to ensure that the fund is not mishandled and all transactions are accurately captured for financial statements and tax purposes. Enter the petty cash fund balance as the beginning balance. Then, get the total of the Amount column to determine total petty cash expenses. That’s also the amount you’ll ask for as reimbursement.

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The department is responsible to appoint a custodian, who is a member of the faculty or staff competent in financial matters, to monitor its use and replenishment. Appointment and approval should be made by the department’s business manager or higher; a custodian cannot appoint or approve himself/herself. Access to the fund must be limited to only the custodian. The custodian will be personally accountable at all times, upon an audit basis, to produce for examination and verification the full principal amount of the Fund. To reimburse expenses, require a receipt from the employee and then provide them with the exact amount of cash and coins from the lockbox.

  • For control purposes, vouchers are sequentially prenumbered and signed by both the person requesting the cash and the custodian.
  • In addition, the Petty Cash Reconciliation for each quarter-end must be submitted to the Accounting Department by the 15th day of the subsequent month of the quarter-ended.
  • Petty cash funds will be established at an amount not to exceed $1,000, unless specifically approved by USNH Controller.
  • After a designated interval—usually, the same time each month or week—it’s time to reconcile or balance the petty fund account.

The advantage of a replenishment process is that it ensures that the used funds are being properly audited. Remember, for all journal entries, total debits must equal total credits. The custodian of the petty cash fund will monitor the fund balance on a regular basis. When the cash balance in the fund is low, the custodian prepares a request for replenishment check. Attached to this request are the receipts from the cash box for all expenditures made from the fund.


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