Question: How Do You Handle Petty Cash?

Who should handle petty cash?

Typically, one employee is responsible for controlling petty cash funds.

This person is known as the petty cash custodian.

The custodian will maintain and document all expenses from the petty cash.

By giving this responsibility to one custodian, it means that you will retain internal control over the money..

How do you liquidate petty cash?

Petty cash procedureComplete reconciliation form. Complete a petty cash reconciliation form, in which the petty cash custodian lists the remaining cash on hand, vouchers issued, and any overage or underage. … Obtain cash. … Add cash to petty cash fund. … Record vouchers in general ledger.

What are the internal control for cash?

Best practice is to have different people:Receive and deposit cash.Record cash payments to receivable records.Reconcile cash receipts to deposits and the general ledger.Bill for goods and services.Follow up on collection of returned checks.Distribute payroll or other checks.

Is petty cash debit or credit?

The Petty Cash System The initial petty cash journal entry is a debit to the petty cash account and a credit to the cash account. The petty cash custodian then disburses petty cash from the fund in exchange for receipts related to whatever the expenditure may be.

What is petty cash float?

The float is the maximum amount that can be held in petty cash at any time. The amount disbursed from the petty cash should be reimbursed when the fund falls to the level at which it must be replenished.

How do I keep my petty cash secure?

Safeguard the cash.Keep petty cash funds in a secure area such as a locked drawer or small safe.Ensure segregation of duties. … Reconcile the log of petty cash expenses to the amount in the cash box at least quarterly, or monthly if the petty cash account is associated with sponsored funds.More items…•

What is petty cash book example?

A petty cash is a cash book used to enter all small or petty expenses obtained. For example tea, Xerox copy etc. The petty cash book is to enter how the cash available for daily expenses are spent for example milk, tea, taxi charges and postage.

How do you manage petty cash?

How to set up a petty cash management systemAppoint someone as petty cash custodian. Only one person at a time should be given responsible for the fund. … Fund the account. … Secure the funds. … Establish policies. … Record disbursements. … Require receipts. … Replenish funds when low. … Monitor spending.More items…•

How is internal control over petty cash?

Bookkeeping Interface. Your petty cash system should be integrated with your overall bookkeeping system to keep an internal control on the way money flows within your business. Cash a business check each time you replenish the fund to document the transfer of funds from your general bank account to your petty cash fund …

How much money should be in petty cash?

Petty cash transactions provide convenience for small transactions for which issuing a check is unreasonable or unacceptable. The small amount of cash that a company considers petty will vary, with many companies keeping between $50 and $200 as a petty cash fund.

What is the purpose of petty cash?

The purpose of a petty cash fund is to make payments for small amounts that are immaterial, such as postage, minor repairs, or day-to-day supplies. A petty cash account is an imprest account, so it is only debited when the fund is initially established or increased in amount.

Is petty cash an asset?

The petty cash account is a current asset and will have a normal debit balance (debit to increase and credit to decrease).