Table of Contents
- 1 What is petty cash fund used for?
- 2 How does a petty cash fund work?
- 3 What is an example of petty cash?
- 4 Why are departments given petty cash fund?
- 5 How do you reimburse petty cash?
- 6 How do I claim petty cash?
- 7 What should not be paid out of the petty cash fund?
- 8 What should petty cash not be used for?
- 9 Why do we use petty cash funds?
- 10 What are common uses for petty cash?
What is petty cash fund used for?
The purpose of a Petty Cash Fund is to allow for the reimbursement or purchase of minor, small-dollar (less than $100), unanticipated business expenses, where the use of alternative means is neither feasible nor cost effective.
How does a petty cash fund work?
Petty cash is simply any physical cash your business keeps on hand to pay for small, unplanned expenses. Most businesses won’t keep more than a few hundred dollars in petty cash around. They’ll usually keep it in a lockbox or a cash register, and will have some kind of system in place to make sure none of it gets lost.
What is an example of petty cash?
Petty cash is a small amount of cash that is kept on the company premises to pay for minor cash needs. Examples of these payments are office supplies, cards, flowers, and so forth. A separate accounting system is used to track petty cash transactions.
What kind of account is petty cash fund?
current asset
Petty cash is a current asset and should be listed as a debit on the company balance sheet. To initially fund a petty cash account, the accountant should write a check made out to “Petty Cash” for the desired amount of cash to keep on hand and then cash the check at the company’s bank.
When would you use petty cash?
A petty cash fund can be used for office supplies, cards for customers, flowers, paying for a catered lunch for employees, or reimbursing employees for expenses. Petty cash’s main advantages are that it’s quick, convenient, and easy to understand and use.
Why are departments given petty cash fund?
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.
How do you reimburse petty cash?
Petty cash imprest funds are provided to enable departments to make cash conveniently available for minor business expenditures. The preferred method of reimbursements is by check, requested via a properly authorized and documented check request.
How do I claim petty cash?
The procedure for petty cash funding is outlined below:
- Complete 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 is the maximum amount for petty cash?
between $30 and $500
Most companies set the maximum amount of cash they carry in the petty cash fund, or petty cash float, between $30 and $500, depending on how much money the business needs to cover its small expenses for emergencies and convenience over a designated period, which is typically one month.
When the petty cash fund is replenished?
Companies replenish the petty cash fund at the end of the accounting period, or sooner if it becomes low. The reason for replenishing the fund at the end of the accounting period is that no record of the fund expenditures is in the accounts until the check is written and a journal entry is made.
What should not be paid out of the petty cash fund?
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: Pay travel expenditures, except for local travel under $50.
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.
Why do we use petty cash funds?
(The term “petty” comes from “petite,” or “small.”)There are two reasons to keep petty cash: To make change for customers or patients To reimburse employees for items they have bought for your business To pay for small purchases which require cash, such as food for the office lunch or coffee supplies, or for parking.
What is the entry to establish a petty cash fund?
To establish a petty cash fund, someone must write a check to the petty cash custodian, who cashes the check and keeps the money in a locked file or cash box. The journal entry to record the creation of a petty cash fund appears below.
What is the purpose of petty cash?
The purpose of a petty cash fund is to provide cash to business units sufficient to cover minor expenditures. The use of petty cash funds should be limited to reimbursement of staff members and visitors for small expenses, generally not to exceed $50, such as taxi fares, postage, office supplies, etc.
What are common uses for petty cash?
Coffee and other beverages