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. Petty cash is a system that funds and tracks small purchases such as parking meter fees that aren’t suitable for check or credit card payments. A petty cash book is a ledger kept with the petty cash fund to record amounts that are added to or subtracted from its balance. Petty cash should be part of an overall business accounting system that documents how your business moves funds between one account and another and how it spends its money. A petty cashier might be assigned to issue the check to fund the petty cash drawer and make the appropriate accounting entries.
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Whether you’re looking to improve accuracy, reduce errors, or streamline processes, vouchers can be an effective tool for achieving your goals. So if you’re not already using vouchers in your petty cash management system, now may be the time to consider implementing them. A systematic approach to petty cash disbursements also reduces the risk of fraud. You can ensure that all payments are legitimate and not misused when you require a thorough review of each transaction.
From an operational standpoint, voucher management can help to prevent fraud and misuse of funds. By requiring employees to provide a voucher for each transaction, it’s more challenging for them to use petty cash for personal expenses or to cover up missing funds. Additionally, by requiring multiple approvals for each voucher, it’s easier to ensure that funds are being used for legitimate business purposes. The process involves different parties who play different roles in ensuring the accuracy of the expenses.
When disbursing cash from the fund, the petty cash custodian updates a petty cash voucher, which should be signed by the person receiving the funds. A petty cash voucher is a document or form that shows the amount of and reason for a petty cash disbursement. One of the conveniences of the petty cash fund is that payments from the fund require no petty cash voucher journal entries at the time of payment. Thus, using a petty cash fund avoids the need for making many entries for small amounts.
- In this blog, we’ll explore how you can adopt petty cash vouchers to make your petty cash management system more reliable and organized.
- To control the petty cash fund properly and record it correctly for tax purposes, the fund should be stored in a secure location and reconciled frequently.
- Creating and filling vouchers can be a tedious task, but it is a crucial one that every organization or business must do.
- This form compiles and manages all business-related expenses in order to avoid any irregularities in a company’s records.
It also allows tracking by branch, department, or location, making it easier for businesses with multiple locations to oversee cash flow accurately. Voucher audit and reconciliation are crucial to maintaining the accuracy and integrity of the petty cash fund. It is essential to document all vouchers, check for duplicates, verify accuracy, review supporting documents, and reconcile the petty cash fund regularly. By following these steps, you can ensure that your voucher management process is efficient and effective.
Replenishment is required periodically, as cash payments from the petty cash box are used to pay for incidental expenses. Consequently, petty cash balances are rarely updated just to improve the accuracy of the financial statements. The custodian is responsible for keeping the petty cash funds in a safe place such as a lockable box only to be accessed when needed. When the custodian disburses money from the petty cash fund, he or she will write out a petty cash receipt which will be signed by the employee who is receiving the funds.
- Petty cash is a small amount of cash on hand used for minor business transactions.
- To permit these cash disbursements and still maintain adequate control over cash, companies frequently establish a petty cash fund of a round figure such as $100 or $500.
- It collects the date, a control number, descriptions of purchases, amounts spent, a total, and signatures from both the requestor and approver to authorize the transaction.
- A petty cash fund is generally kept so that employees of a business can make small purchases without having to requisition money, use a company credit or debit card, or have a check cut.
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At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks. For the past 52 years, Harold Averkamp (CPA, MBA) hasworked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online.
Since it can be easy to ‘leak’ money through petty cash, most companies set rules around access and acceptable spending reasons. This means that companies don’t need to have a petty cash voucher book and separate receipt book since the document is the same and only the title is different. So, adopting a voucher system streamlines petty cash management with enhanced accountability and financial oversight. Typically, the manager or supervisor of the department is responsible for approving these vouchers.
Petty cash is a small and fixed fund created to pay for small-scale work or business expenses without formal bank transaction procedures. It cuts down on paperwork, saves time, and makes urgent payments easy to deal with. It is administered by an individual known as a petty cashier, who records everything in a petty cash book. When learning the fundamentals of accounting, students read many terms such as petty cash book format, petty cash meaning or petty cash voucher. This article explains all the related concepts such as what is petty cash, petty cash book meaning and its uses, petty cash book definition, examples, pros and cons of petty cash etc. We’ll also explore how to post the vouchers, format the book and reconcile it.
Vouchers can help reduce errors and prevent fraud by requiring proper documentation and authorization. Talk to us today and see how Summit can help you manage petty cash with confidence. By removing manual paperwork, Summit improves accuracy, speeds up reimbursement, and gives finance teams full control over petty cash. A cash voucher can be defined as an official document that contains information about various cash dealings within an entity.