Petty Cash: What It Is, How It's Used and Accounted For, Examples

Petty cash is a small amount of cash kept on hand to pay for minor expenses. It is typically used to cover expenses that are too small to justify writing a check or using a credit card. Petty cash is often used to pay for things like office supplies, postage, and travel expenses.

There are a few different ways to manage petty cash. One common method is to create a petty cash fund. A petty cash fund is a set amount of money that is set aside for petty cash expenses. The fund is typically managed by a designated employee, who is responsible for issuing petty cash payments and keeping track of the fund's balance.

Another way to manage petty cash is to use a petty cash imprest system. An imprest system is a system in which a fixed amount of money is set aside for petty cash expenses. The money is typically kept in a petty cash box or drawer. When an employee needs to make a petty cash payment, they take the money from the petty cash box and sign a petty cash voucher. The voucher is then submitted to the person who is responsible for managing the petty cash fund. The person who is responsible for managing the petty cash fund then replenishes the fund by adding the same amount of money that was taken out.

Petty cash is an important part of cash management. It allows businesses to pay for small expenses without having to write checks or use credit cards. Petty cash can also help businesses to control their spending. By tracking petty cash expenses, businesses can ensure that they are not overspending on small items.

Here are some examples of how petty cash can be used:

* To pay for office supplies, such as paper, pens, and pencils.
* To pay for postage.
* To pay for travel expenses, such as taxi fares and parking.
* To pay for meals and incidentals when traveling on business.
* To pay for small repairs or maintenance.

It is important to use petty cash only for small expenses. If an expense is too large to be paid for with petty cash, it should be paid for with a check or credit card.

Petty cash should be accounted for in the same way as any other cash transaction. When an employee makes a petty cash payment, they should record the transaction in the petty cash journal. The petty cash journal should include the date of the transaction, the amount of the transaction, the payee, and a brief description of the expense.

The petty cash fund should be reconciled on a regular basis. The reconciliation process involves comparing the amount of money in the petty cash box to the amount of money that is recorded in the petty cash journal. If the two amounts do not match, the difference should be investigated and any discrepancies should be corrected.

Petty cash is a valuable tool for businesses of all sizes. It can help businesses to pay for small expenses quickly and easily. Petty cash can also help businesses to control their spending and to track their expenses.