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To properly maintain the total amount of cash in a cash box, team members must receive training on appropriate uses for the petty cash fund, cash management, and how to register transactions in a cash log. If your business has a petty cash fund, you could grab a $10 bill from the cash drawer, run to the convenience store and purchase a card. This is a more common and convenient practice than an employee paying out of pocket and requiring reimbursement. A petty cash fund is a nominal amount of money held by a business for small expenses.
Police Department incident reports will be distributed within three days of the theft to the Department Head, Risk Management, the Controller’s Office, and Internal Auditing. The Internal Audit Department will communicate to the Controller’s Office whether loss is insured or loss is a result of negligence. While a petty cash fund may not be necessary if you work solo, if you have even one employee, it may be worth it to set up a petty cash fund to manage those unexpected expenses properly. For example, for Jane to get reimbursed for the donuts she purchased for the meeting, she needs to provide a receipt.
Petty Cash Procedures
It is not possible to operate without milk, and the normal shipment does not come from the supplier for another 48 hours. To maintain operations, it becomes necessary to go to the grocery store across the street and purchase three gallons of milk. A petty cash fund is a type of imprest account, which means that it contains a fixed amount of cash that is replaced as it is spent in order to maintain a set balance. 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.
An imprest checking account requires the additional approvals of the USNH Controller and Vice Chancellor. See Procedure 4-002, Imprest Checking What should Petty Cash funds be used for? Accounts, for further details. Many of your business expenses are tax deductible, including purchases made with your petty cash fund.
Campus Controller’s Office
The custodian must provide Rice Identification before funding will occur. A Petty Cash Fund Request form must be completed, indicating if the fund is intended as a permanent or temporary fund, along with a brief description to support the fund purpose. The Petty cash Fund may not be used to cash checks of any kind or to grant salary advances to University personnel. The fiduciary of the fund is responsible for ensuring that these procedures are followed. Non-compliance with these procedures will result in immediate dissolution of the fund. With a Ramp card, you can also set limits on spending categories.
A department should never create or increase an imprest cash fund from UAB revenues. Under the imprest system, a fixed sum is established as a petty cash or change fund. The exact amount depends upon the specific requirements of the department in question. Any items that are unallowable via the Institute’s Purchasing department are also unallowable to be purchased using petty cash funds. Please see the Institute’s Allowable Cost Matrix at /allowable-cost-matrix for additional information on allowable and unallowable Institute purchases. Also, items that are required to be purchased through the Purchasing department may not be purchased with petty cash funds even if the shipment of the item has been delayed or it is out of stock.
What is Petty Cash? How to Manage it?
Guidelines for acceptable expenditures are available in the Procurement Policy. All questions relating to School of Medicine Petty Cash funds should be directed to the NYULMC Controller’s Office. Take the approved Form EXP2000P with the attachments, in person, to the Office of the Bursar.
Why is petty cash risky?
Risk of Fraud
Because it's a liquid asset, there is a lack of control over how the money is spent, as employees only need to fill up the petty cash book and produce a receipt as proof of transaction. This loophole in the system makes it easy for employees to misappropriate funds and spend them on personal reasons.
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. To get the fund started, cash a check with an amount that seems appropriate for the size of the company and the volume of anticipated transactions. The amount should be small enough that it’s not terribly tempting for theft, but also big enough that it will be adequate for a month. If your GL doesn’t already have a Petty Cash account on the balance sheet, you’ll need to add one.
The fund should be reimbursed to its original authorized amount at least once each fiscal month. To ensure all reimbursed expenses are properly recorded in the proper fiscal year, all funds MUST be reimbursed by the last week of June (the end of the fiscal year). To establish a petty cash account , the business writes a check to a petty cash custodian. The petty cash custodian is in charge of cashing the check and maintaining the amount of cash in the cash box. Petty cash funds are a holdover from an era when credit cards were not used for small transactions.
What do most businesses use the petty cash fund to pay for?
Petty cash is most commonly used for small, office-related expenditures. Typical examples of petty cash purchases may include stamps, coffees, supplies, snacks, or parking fees.
Departmental Petty Cash Funds
Departments may request approval to establish departmental petty cash funds to reimburse petty cash expenditures. Change Funds are used to give change to customers when they are paying for goods or services. If the balance in the petty cash account is supposed to be $75, then the petty cash box should contain $45 in signed receipts and $30 in cash. Assume that when the box is counted, there are $45 in receipts and $25 in cash. In this case, the petty cash balance is $70, when it should be $75.
Petty Cash: Accounting & Beyond
Loss of petty cash funds will be charged to the responsible Banner account as listed on the Cash Fund Request form. Petty cash funds must never be commingled with other USNH cash funds, personal funds, miscellaneous cash receipts, or collected revenue of any type. The Custodian’s supervisor should periodically inspect the records and count the cash (in the continual presence of the Custodian) in the petty cash fund to ensure proper accountability. The petty cash fund must be physically counted and reconciled before it is accepted by the new Custodian. Absence of the Custodian – During absence or vacation, a Custodian may place the petty cash fund with a temporary Custodian.
After collecting receipts from your employees, update your books to show the used petty cash. You must debit your Postage, Meals and Entertainment, and Office Supplies accounts and credit your Petty Cash account. To create journal entries that show petty fund purchases, you must debit the corresponding accounts (e.g., Office Supplies account if you purchase supplies) and credit your Petty Cash account. Create a petty cash log that details what was purchased, the amount of the purchase, the date it was purchased, the account affected (e.g., Office Supplies account), and which employee received the funds. Like any other type of transaction, you must record petty cash transactions in your small business accounting books. Read on to learn about establishing a petty cash fund, handling petty cash accounting, reconciling your petty cash account, and claiming a tax deduction.