Skip to main content

Petty cash is money that is kept on hand for a business. It is used to pay  for smaller, incidental expenses like employee reimbursements or office supplies. Monies that go in and out of a petty cash fund must be accounted for and recorded. Also, there are periodic reconciliations for petty cash funds. In larger organizations, each department may have its own designated petty cash fund. 

What is Petty Cash?

Having petty cash available is a convenience for businesses. Oftentimes, small transactions need to be made, and it is not reasonable or acceptable to issue a check or use a corporate credit card. Businesses vary in the amount of petty cash they keep on hand. Some companies keep between $100 and $500 in their petty cash fund.

The term “Petty” is an English term derived from the French word “petit,” which means small or little. Petty can also mean insignificant or minor. Petty cash then, is a small amount of money that is set aside for little purchases as opposed to large bills or expenses.

What Expenses are Covered by Petty Cash?

Petty cash funds cover small expenses that may pop up on a normal business day. Some examples include purchasing cards for customers, reimbursing an employee $4 for office supplies they purchased or paying the mail carrier 50 cents for postage due. The guidelines for spending out of the petty cash fund will be determined by managerial staff. 

What Type of Account is the Petty Cash Fund?

Petty cash funds can be classified as different types of accounts. It is a cash account, as well as a current asset. It’s also known as an imprest account.

  1. Current Asset: Petty cash is classified as a current asset, and it is listed as a debit on the company’s balance sheet. Usually, a check is issued to “Petty Cash” to keep the specified amount of cash on hand.
  2. Cash Account: Once the check is cashed at the bank, the cash is placed in a safe location such as a locked drawer or cabinet. When a receipt is reimbursed using cash from the petty cash account, the receipt is placed in the drawer so the cash can be properly accounted for.
  3. Imprest Account: Petty cash is the most well-known of imprest accounts as it uses cash-on-hand to cover small transactions. Cutting a company check for smaller purchases is not reasonable.

How Do You Account for Petty Cash?

To account for petty cash, a log is created to detail transactions. Every time money goes into or leaves the petty cash fund; a journal entry is made. The petty cash log includes details for anything that is purchased, how much the purchase cost, when it was purchased, and which account was affected. Also included is which employees received and spent the funds. 

Create a journal entry for each time petty cash is placed into the petty cash fund. The entry should show the increase in the Petty Cash account and a decrease in the cash account. To show this transaction, the petty cash account is debited, and the cash account is credited. When petty cash funds run low, they must be refilled to their predetermined amount. At this point, create an entry that debits the petty cash account and credits the cash account.

How Should Petty Cash Be Handled?

Determining how to handle petty cash accounts helps ensure the funds are used appropriately. Without a system for handling petty cash funds, companies are vulnerable to theft. Managing a petty cash account provides oversight and makes it easier to enter the expenses in a bookkeeping system. Setting it all up is easy.

  • Appoint a Petty Cash Custodian. Assign one person who is responsible for overseeing the funds. The custodian shouldn’t be the same individual who records petty cash transactions in the company’s general ledger.
  • Put the designated funds in the account. Cash a check that is written for the amount you want to maintain in petty cash funds. It can be any amount that makes sense for your business.
  • Secure the money in a locked drawer or file cabinet. Funds should always be secured in a locked location. Only the custodian and the business owner should have access. 
  • Establish handling policies. Create guidelines for using petty cash. Set a maximum disbursement, and determine what types of expenses are covered.
  • Record all disbursements. Record keeping is essential to managing petty cash.
  • Require receipts for every transaction. Even though the monetary amounts are small, receipts should be required as a way to track and monitor spending. 
  • Replenish funds when they run low. The petty cash fund should be balanced. When funds are low, they should be replenished to cover incidental costs.
  • Monitor spending. Petty cash funds should be reviewed regularly to ensure they are used for preapproved expenditures. 
  • Regularly reconcile the account. Bookkeepers and accountants should register petty cash transactions in the general ledger. 

Each company will have to decide on the particulars pertaining to the use of its petty cash fund. In most instances, employees who make approved purchases will need to provide receipts for their purchases. Whether they are given cash in advance or bring in a receipt following a purchase, all the guidelines for handling petty cash should be clearly stated in writing so confusion is minimal.

Who is the Person in Charge of Petty Cash?

In most instances, an employee is appointed to be the custodian in charge of petty cash. The custodian is responsible for maintaining and documenting expenses that are taken from the petty cash. When they disburse funds from the petty cash account, the custodian writes out a petty cash receipt which is to be signed by the employee who receives the funds. 

A petty cash custodian doesn’t need to be an accountant. They do need to be responsible and trustworthy. The custodian does need to have a general knowledge of bookkeeping and record-keeping skills.

Where can Petty Cash be Kept?

The most common approach for storing petty cash is to assign an employee the role of a custodian. They are responsible for managing the petty cash. In most cases, the cash is kept in a money box inside a designated office. The primary concern is to keep the cash accessible to only the custodian and business owner or a manager. To keep theft to a minimum, the cash should be locked in a drawer, closet, or file cabinet. 

What are the Pros and Cons of Petty Cash?

Petty cash has been a much-used method for quick funds for purchases, especially small ones. Like other accounting methods, there are pros and cons. Here are a few advantages and disadvantages to help you determine if it is a helpful method or not.

Pros of Petty Cash Cons of Petty Cash
Easy to understand and familiar Purchases harder to track receipts
Convenient for small purchases Susceptible to abuse
Alternative to credit cards Can’t handle large expenditures
Minimizes mistakes Have to find a person to get cash

What Happens if the Petty Cash Fund is Over?

The petty cash fund should be reconciled periodically. Normally, this occurs at the end of the month. However, businesses may need to do it more or less often based on the flow of cash. The receipts are calculated to ensure that the total matches the funds that were dispersed from petty cash. The receipt total plus the cash left in petty cash should equal the monthly allotment for the account. If there is an overage, the discrepancy should be identified so that it can be corrected and the petty cash balance restored to the predetermined amount and accounting records adjusted.

What Happens if the Petty Cash Fund is Short?

If there is a shortage in the petty cash fund discovered during the reconciliation process,  an investigation should be conducted to determine where the error lies. No matter what caused the shortage, the funds will need to be topped back up to the predetermined levels for petty cash.

Why is Petty Cash Necessary for Businesses?

A properly managed petty cash account can provide businesses with many benefits. It is a convenient method for making smaller purchases, and it doesn’t need a lot of oversight. Petty cash is a great option for small purchases and minor emergencies. Once the SOP is in place, no setup is required. Cash is easier for employees to make small purchases. It’s also more convenient for everyone involved than working through the process of reimbursing employees. 

Petty cash is a simple alternative to issuing employees corporate credit cards. Employees cannot accidentally exceed approved spending amounts. Additionally, if the employee leaves, changing card authorization can be a headache.

Managing petty cash funds is easy and doesn’t need as much oversight as other types of accounts. For accountants and bookkeepers, it’s easier to record petty cash as a single transaction instead of needing to enter each of the small purchases made out of the account.

Is it Possible to Pay Wages with Petty Cash?

No. Petty cash is designed to cover minor purchases and incidentals. It should not be used for standard operating expenses. Items that should not be covered by petty cash include goods, services, wages, and salaries.

Is a Petty Cash Book Recordation of Petty Cash Expenditures?

Yes. A petty cash book is used to record each of the small expenses covered by petty cash funds. These are small expenses such as postage, office supplies, etc. A separate column is used for each expenditure type. 

Is Petty Cash Counted as Cash on Hand?

Even though they sound a lot alike, petty cash and cash on hand are two separate terms with two different definitions. However, they may overlap a bit. Petty cash is its own fund that refers specifically to physical money kept on hand for small expenditures. Cash on hand is a business and accounting term that refers to any cash and liquid funds accessible to the business.

xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonxosofutebol ao vivofutemaxmulticanaisonbethttps://bsport.fithttps://onbet88.ooohttps://i9bet.bizhttps://hi88.ooohttps://okvip.athttps://f8bet.athttps://fb88.cashhttps://vn88.cashhttps://shbet.atbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩaAG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88