How do you set up a petty cash system?

How do I set up a proper petty cash system?

1. Step 1: Get a lockbox or cash register.
2. Step 2: Choose a petty cash custodian.
3. Step 3: Set an initial amount, a replenishment threshold, and a withdrawal limit.
4. Step 4: Go to an ATM, or write a check to petty cash.
5. Step 5: Create a petty cash log.

How do you control petty cash expenses?

Seven simple steps to improve controls over petty cash

1. Decide on a float and when to replenish.
2. Segregation of roles.
3. Define the expense limit and approval matrix.
4. Use petty cash vouchers for all petty cash transactions.
5. Demand receipts to back up the expenses claimed.
6. Review and approval of petty cash reimbursement request.

How do you organize petty cash receipts?

How to Keep Track of Petty Cash

1. Step #1 – Purchase a Lock Box.
2. Step #2 – Assign Responsibility.
3. Step #3 – Store the Petty Cash Box and Set a Limit.
4. Step #3 – Deposit Cash into the Petty Fund.
5. Step #5 – Create a Transaction Log.
6. Step #6 – Track the Petty Cash Fund on the Accounting Records of Your Business.

What are the two methods in accounting for petty cash fund?

The petty cash fund can be operated in the two ways: ordinary and imprest system of petty cash fund.

How do you record petty cash in general ledger?

The petty cash journal entry is a debit to the petty cash account and a credit to the cash account. The petty cash custodian refills the petty cash drawer or box, which should now contain the original amount of cash that was designated for the fund. The cashier creates a journal entry to record the petty cash receipts.

How should a petty cash system be maintained?

Ideally the money should be kept in a lockable cash box. The petty cashier should keep the key to the petty cash box in a safe place with a duplicate key being kept by the main cashier or accountant. The box together with the petty cash book should ideally be kept in a fireproof safe or cabinet.

Do you need receipts for petty cash?

Receipts. The IRS requires receipts for all expenses over $75, but it is a good habit to get receipts for every petty cash transaction, no matter how small. The receipts will provide the backup to the petty cash replenishment checks when you need to top up the fund.

What should petty cash not be used for?

Petty cash should not to be used as an operating fund, i.e., to pay invoices for goods or services, to pay salaries or wages, or to make advances or loans. In accordance with Policy 1505, the petty cash fund cannot be used to: Purchase goods currently covered by a University negotiated contract.

What is petty cash summary sheet?

Instructions. A petty cash fund is a fixed sum of money for the purpose of making cash payments for small purchases where more formal procurement or payment actions would be uneconomical. The form is to be used to summarize purchases and request replenishment of the fund.

How do you report petty cash on a balance sheet?

The petty cash amount may appear as the first or second item listed in the current asset section of the balance sheet. However, the petty cash amount might be combined with the balances in the other cash accounts and their total reported as Cash or as Cash and cash equivalents as the first current asset.

How do I set up petty cash accounts for my business?

If you have a larger SMB, you may want to set up petty cash accounts for each of your divisions. Add a Petty Cash Account to your Chart of Accounts if you do not already have one. Start a petty cash fund by writing a check drawn on your company to “Petty Cash.” Cash the check.

What are petty cash expenses and how do they work?

A petty cash expenses list will typically take the form of a paper form or an Excel spreadsheet. When the fund falls below a certain level, the custodian can request for the fund to be topped up. When new money is added, a check will be made to ‘balance the books’, making sure the amount that has been taken out, matches the cash that’s left in.

How do I manage multiple petty cash funds?

If you have multiple petty cash funds in multiple divisions, give two people access in each division. One person should have the responsibility for replenishing the petty cash fund. The second person should have responsibility for recording the petty cash transactions into your bookkeeping system.

Where should I place my petty cash in my office?

The drawer, box, or safe in which you place your petty cash should have a designated location within your office from which it should not be moved. Include a ledger page and an envelope for receipts with the petty cash: The custodian (s) of the petty cash should record every petty cash transaction and include a receipt.