Petty cash how much

For each transaction, record the date, the amount, and what it was for. Be as specific as possible, so there is no doubt that the transaction was business-related. You don't need to keep track of change each day. But at the end of each day, record the amount in the petty cash drawer. The difference should tally with cash payments made by customers and with the total of petty cash expenses paid from the drawer.

Before you start using petty cash, add a petty cash policy section to your employee policies and procedures manual. Include these items in the policy, and consider how you can reduce the risk of employee or customer theft. The most important part of a petty cash system is the documentation of each transaction.

Documenting transactions is the way a business documents business expenses for tax purposes. By keeping track of all petty cash transactions - no matter how petty- you have records to back up deductions for those small business expenses. The more documented petty cash expenses, the more your deductions, and the lower your business tax bill. Actively scan device characteristics for identification. Use precise geolocation data. The petty cash custodian is in charge of managing the petty cash fund.

If your business is small enough, this might be you. If you run a nonprofit , this will likely be your treasurer. For slightly larger small businesses, this might be your office administrator. Why one person? Making a single person responsible for petty cash cuts down on confusion and minimizes the risk of theft.

How much petty cash should you keep on hand? Use your judgement, and put less into the petty cash fund than you think you need—you can always increase the amount later. This is the first entry in your petty cash account, represented by the following journal entry that shows petty cash leaving your bank account.

Notice how the far right-hand row lists the current balance of the petty cash fund? Download link sent. Category Corporate Finance and Accounting. Introduction Petty cash is a nominal sum which is preserved in hand to cover minor expenses, such as reimbursements or other office-related expenses. Breaking Down Petty Cash The presence of petty cash provides the much-needed flexibility for doing small transactions for which handing out a demand draft or a bank cheque seems illogical.

The following are some of the transactions for which petty cash is made use of: Office stationeries Office supplies Water dispensary Team lunch Refreshments for the clients who visit the office for business Reimbursing employees who have spent a nominal sum on behalf of the company Each department would have appointed an executive to look after the transactions of the petty cash reserve.

Journal Entries Even though petty cash is a nominal sum, the transactions made using petty cash is still recorded in the financial statements of the organisation. Related Terms. Recent Terms. Establish a starting dollar balance for the petty cash fund. Pick a dollar amount you think will cover small office expenses for a month or so. Petty cash is often used to make change for customers and pay for small, erratic expenses that pop up. These expenses could be things like office supplies, a small repair, and so on.

Put your petty cash policy in writing and offer some examples of appropriate expenses. For example, petty cash may be used to purchase additional postage, paper towels, coffee, or other basic office supplies.

However, failing to hold employees accountable for petty cash may encourage theft or inappropriate use of company resources. Require that employees maintain a running petty cash log for every transaction, including receipts. Each entry in the petty cash book should include the date, the amount, and what was purchased with the petty cash. Review your petty cash register before you replenish the petty cash fund.