Documenting Petty Cash Fund Purchases - Medseka
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Documenting Petty Cash Fund Purchases

Documenting Petty Cash Fund Purchases

what is petty cash

Bring a petty cash voucher with supervisor approval and brief explanation of charge with the original receipt to the Accounts Payable office. Custodians may provide a cash advance to an employee who is going to make a purchase up to two days in advance of the anticipated purchase. The fund custodian is responsible for the return of the funds or an appropriate receipt.

This description is for imprest accounts that were established prior to June 30, 2020. At fiscal year end, the Change/Petty Cash Verification form is sent to each fund custodian by the Accounts Receivable Supervisor. This form must be completed and returned within 10 business days for year end reconciliation. The cashier QuickBooks has the employee sign and date the petty cash voucher to indicate that the employee received the money. To ensure that an adequate system of internal control over the petty cash funds is maintained by the departmental custodians of those funds. Set up the petty cash custodian as a Petty Cash Custodian Vendor Type .

Human subject payments may be made through the petty cash funds, subject to several limitations. A detailed log must be maintained and a copy submitted with the reimbursement request. The log should show the payee’s name, tax identification number, date and amount of payment, and the accounting chartfields to be used for the expense.

At the completion of each sales day, the cash drawer needs to reconcile. The amount in the cash drawer needs to equal the balance that it was established with. If the remaining funds do not equal the exact amount of the day sales, an additional line may be added to the sales deposit to account for this. The sales amount would either be increased (overage, +amount) or decreased (shortage, -amount) for that day using object code 6400 Over/Short – Cash. This account is not changed unless there is a change in the value of the petty cash/cash drawer. All entries to reimburse the petty cash are charged to an operating account, not the original petty cash account.

1.0 PurposeThis policy establishes the proper use and administration of petty cash funds. When other disbursement methods cannot be used, petty cash funds can provide cash to departments to cover minor expenses such as taxi fares, postage and emergency office supplies. Other uses include establishment of a change fund for departments that collect cash receipts on behalf of the University and require change to appropriately complete the cash transactions. The University requires each petty cash fund to have an approved Custodian, who documents expenditures, keeps receipts, and safeguards the funds. Wherever possible, departments should use other disbursement methods instead of petty cash.

A petty cash or change fund is money advanced to a department, issued in the name of an employee, designated as the fund custodian. The purpose of the petty cash fund is to provide cash on hand for a department to reimburse small recurring expenses of $100 or less to employees.

By giving this responsibility to one custodian, it means that you will retain internal control over the money. Cash on hand is any accessible cash the business or liquid funds have. It can be in the form of actual money, like amounts you haven’t yet deposited in the bank or smaller bills and coins that you keep in the cash register to make change for customers. Thejournal entryto fund petty cash would debit the account and credit to cash bank account. At the end of each period, the fund must be evaluated to see if there are enough funds for the future periods. If not, additional funds must be transferred from the normal business checking account.

Petty Cash Funds

A petty cash fund may not be used to make personal loans or salary advances. Authority to establish a petty cash fund must be requested by the department head from the Associate Treasurer or a designee.

What is petty cash and its purpose?

Overview and Purpose

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.

Oh, also, you need to buy your team some food for a late afternoon sprint, and the office printer is out of ink. Your company isn’t big enough to have company credit cards yet, and you’re big on keeping personal and business expenses separate. Integrated storage allows all records to be easily linked directly to the transaction details. This also makes what is petty cash it easy for internal auditors to review petty cash records. There are many ways an organization can enhance the management of its petty cash fund to address some of the pitfalls and challenges of a traditional, paper-based approach. With petty cash on hand, there is an increased tendency to spend the money freely without attention to detail.

The amount you select for your petty cash fund must be sufficient to cover small expenses over a designated period, usually one month. You will also need to set up a petty cash account in the asset section of your recording transactions financial reports. Once approval is received to increase your petty cash/cash drawer, complete a DV, payment reason “Z”, for the additional funds using the employee record instead of the Petty Cash Vendor record.

A When Petty Cash May Be Used

The petty cash custodian then disburses petty cash from the fund in exchange for receipts related to whatever the expenditure may be. There is no journal entry at this point; instead, the cash balance in the what is petty cash petty cash fund continues to decline, while the number of receipts continues to increase. The total of the receipts and remaining cash should equal the initial amount of petty cash funding at all times.

  • The cash should be kept in a locked drawer or cabinet with the key in the custodian’s possession.
  • Requiring a Petty Cash Fund Request and a Petty Cash Reconciliation be completed by the fund custodian, verified by the department signature authority, and returned to the Cashier’s Office.
  • In order to put money into the petty cash account, money has to be taken out of the business checking account.
  • The person signing to approve the form must have signature authority on the Fund / Org listed.
  • If it is suspected that the shortage is due to theft or other illegal activity, RUPD must be contacted.
  • He is the sole author of all the materials on

Any cash received by an employee to make an approved purchase should be recorded on the Cash Fund Activity Log confirming receipt of the money. If everything adds up and you’re simply burning through petty cash regularly, evaluate your spending and look for areas to cut. For example, if you’re buying tons of office supplies week after week, maybe you should look into bulk ordering the supplies to cut down on spending.

Iii Procedures For Handling Petty Cash & Change Funds

All requests for a petty cash account require authorization from the department executive or financial administrator, as well as the divisional financial dean or designee. You can set up your petty cash float – the maximum, fixed amount of on-hand cash – by cashing a check, usually ranging from $100 to $500 depending on the size of your business. Larger companies often have a petty cash fund for each department.

For example, if your imprest balance is $100, the total of cash and receipts at any given time should be exactly $100. The designated person is responsible for maintaining the balance at the imprest level. Petty cash is subject to audit at any time by the Controller or designee. If approved for a specific period, a petty cash fund or a change fund should be closed at that date, or an extension requested and justified. If a fund is no longer used or required, it should be closed regardless of the original schedule. A fund is closed by submitting the current receipts and the remaining cash to the Treasury Office with a covering memorandum and without a request for reimbursement. Most people use petty cash for things like buying office supplies, paying for postage, and so on.

What is a good cash float?

In most businesses, having a cash float of $150 to $200 is the norm.

Non-compliance with these procedures will result in immediate dissolution of the fund. Complete theTransfer of Petty Cash/Cash in Drawer Fund Accountability Form.

This amount is usually spent over a period of a month or two, and is replenished when necessary. The employee receives permission from the Budget Unit Head to make a cash purchase from personal funds. Petty cash and change funds which have been inactive for two years will be closed.

As you make each payment, you will need petty cash slips or a transaction list. For each transaction, record the date, the amount, and what it was for. If you use the petty cash account to make change for customers, you will need to do a mini-audit at the end of each day. Start with beginning balance, cash in, cash out compared to transactions, and ending cash.

what is petty cash

Departmental reimbursements of cash purchases from personal funds will be processed through the Cashiers Office Petty Cash Fund located in Smith Hall. The department will have 7 business days from date of receipt to turn in the petty cash voucher for processing. This policy precludes students from incurring expenses for the university. Upon occasion it may be necessary for staff of departments which do not have a petty cash fund to make cash purchases from personal funds. Such expenditures will be reimbursed if proper receipt is obtained and presented for reimbursement in accordance with the procedures set forth herein. Under no circumstances may undeposited receipts be used as a petty cash fund, nor may petty cash funds be commingled with other funds. Petty cash funds and petty cash change funds may not be used to cash checks of any kind.

An amount of $100 would typically be sufficient for most small business needs as the expenses to be covered are for small amounts. The bookkeeping entry for this initial fund would be to debit Petty Cash and credit bank account. This cheque would then be cashed to acquire the actual cash needed for payments. That’s a long way of saying it’s “shoebox money” for expenses which are usually too small to bother using a credit card or writing a check. Whenever money is coming in or out of the petty cash funds account, it needs to be recorded. In order to reconcile the petty cash fund to balance, the necessary debit or credit will be entered depending on if the account is over or under stated. The petty cash fund will then be replenished for the next month.

To obtain replenishment of petty cash funds, a Petty Cash Reimbursement form must be used. The form, with all applicable receipts attached, shall be submitted according to processes defined by Financial and Business Services.

what is petty cash

Annually, departments should examine whether their petty cash account is still required to meet the department’s business needs, or if alternative disbursement methods could suffice. Funds are considered inactive if they have no activity during a fiscal year. Put your petty cash policy in writing and offer some examples of appropriate expenses. For example, Accounting Periods and Methods petty cash may be used to purchase additional postage, paper towels, coffee, or other basic office supplies. You can also mandate that all petty cash transactions be under a certain dollar amount, like $25. This should be small enough that employees won’t be tempted to steal it but large enough that you don’t have to replenish it too often.

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