How to fix petty cash? (2024)

How to fix petty cash?

Your petty cash records might be inaccurate due to employee theft or accounting errors. To fix discrepancies, reconcile your petty cash. For petty cash reconciliation, subtract the amount in your petty cash fund from the amount stated in your books. This shows you how much cash you have withdrawn from the fund.

Your petty cash records might be inaccurate due to employee theft or accounting errors. To fix discrepancies, reconcile your petty cash. For petty cash reconciliation, subtract the amount in your petty cash fund from the amount stated in your books. This shows you how much cash you have withdrawn from the fund.

6. Replenish. If the petty cash fund is running low or depleted, replenish the funds. Submit the reconciled documentation to the finance or accounting department for approval and allocate the necessary funds to restore the petty cash balance.

For Example, this Daily Bank Deposit Summary shows a Cash Out On Petty Cash entry for 100.00. To reverse this entry, make a Petty Cash transaction for -100.00. Note: A positive Petty Cash amount will be taking money out of the till and a negative amount will be putting money back in to the till.

Reconciling petty cash transactions on a regular basis is essential to identifying and correcting discrepancies and maintaining the integrity of the petty cash fund. Petty cash reconciliation is usually conducted when funds are low and the petty cash custodian is requesting additional funds.

Reconciling Petty Cash

If new funds are needed, the cashier writes a new check to fund the petty cash drawer and takes, in exchange, the receipts from the purchases that depleted the cash.

Cash Handling & Banking

To increase the amount of the Petty Cash Fund, the department sends the request and justification along with a prepared Miscellaneous Direct Payment Request to Business & Financial Services. If approved, Business & Financial Services will contact the Custodian to pick up and sign for the check.

This is usually done by transferring money from the business's main bank account to the petty cash account. Reimbursem*nt is when a business refunds an employee for an expense they incurred on behalf of the business. It could be in the form of a direct deposit, cheque, or cash payment.

How to replace petty cash?

Debit cards or gift cards

One alternative to petty cash funds is a debit card or Visa gift card.

A petty cash custodian is responsible for the branch's minor and small cash transactions. Further, they will be responsible for journal entries, record-keeping, and other maintenance of all petty cash transactions.

General Information on Petty Cash

Purchases with Petty Cash are limited to $100 per vendor per day. A Petty Cash fund should be replenished either monthly or when accumulated receipts total $200 – whichever occurs first. The types of purchases allowed to be made with a Petty Cash fund are extremely limited (see below).

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.

Automating Petty Cash Reconciliation

Digital Receipt Management: Implement digital receipt management solutions that allow employees to upload receipts directly into the system using mobile devices. This eliminates the need for manual receipt collection and ensures that all transactions are documented electronically.

Local petty cash custodians are responsible for safeguarding petty cash funds and maintaining receipts and detail records to support all transactions.

In accounting, you must treat petty cash funds as current assets. It appears as a petty cash balance with other cash accounts, such as savings or checking accounts. Once the custodian records the entry in the branch's accounting books, they must receive the cash against it.

Petty cash should ideally be reconciled monthly to ensure accurate tracking and control of funds.

How to manage petty cash effectively?

Set Clear Guidelines: Establish clear guidelines on the purpose and usage of petty cash. Communicate these guidelines to all employees accessing the fund to avoid misuse and ensure consistency. Define Spending Limits: Determine spending limits for individual transactions so that the funds are not exhausted quickly.

Petty cash custodians should reconcile a petty cash fund at least once a month to ensure that the total cash on hand plus total receipts not yet submitted for replenishment, petty cash replenishment requests in process and any uncashed replenishment checks equal the original amount of the petty cash fund.

It might seem tedious to log every tiny expense in this way, but there's nothing petty about petty cash expenses. You must document all of your petty cash expenses if you want to write them off on your taxes, just like you would any other income or expense.

Such businesses often make changes for customers, or they may entrust employees to solve problems by making individual purchases. Thus, even for businesses that don't make transactions with customers, petty cash can still be useful.