How to Account For Petty Cash

Petty cash is a small amount of cash that is kept on hand to cover small expenses such as office supplies, postage, or other miscellaneous expenses. Keeping track of petty cash can be a challenge, but it's important to do so in order to maintain accurate financial records. Here are some steps to account for petty cash:

1. Determine the amount of petty cash needed: Decide on the amount of money needed to cover small expenses. This will depend on the size of your organization and the types of expenses that you typically incur.

2. Create a petty cash fund: Once you have determined the amount needed, create a petty cash fund by withdrawing the amount of cash from your bank account or transferring funds from another account. Keep this cash in a safe place, such as a locked box or drawer.

3. Establish a petty cash log: Establish a petty cash log to keep track of all transactions involving petty cash. This log should include the date, the amount of the expense, the purpose of the expense, the name of the person who made the expense, and the balance of the petty cash fund after the transaction.

4. Record transactions: Whenever petty cash is used, record the transaction in the petty cash log. This should include the date, the amount of the expense, and the purpose of the expense. Make sure that receipts are obtained for all transactions.

5. Replenish the petty cash fund: When the petty cash fund runs low, it needs to be replenished. To do this, add up the total amount of expenses in the petty cash log and withdraw or transfer this amount from your bank account.

6. Reconcile the petty cash fund: At regular intervals, reconcile the petty cash fund by comparing the total amount of cash on hand to the total amount recorded in the petty cash log. Any discrepancies should be investigated and corrected.

7. Review and audit: Regularly review and audit the petty cash log to ensure that all transactions are properly recorded and that the petty cash fund is being used appropriately.

By following these steps, you can effectively account for petty cash and maintain accurate financial records.