How Petty Cash Works and How To Keep It Balanced

Petty cash is pretty simple but commonly mismanaged.  Petty cash would be funds kept for small expenditures and making change.  Petty cash works on a simple premises.

$ Cash starting balance           $10

+ Cash Deposits                        +$1

– Cash expenditures                – $2

=Cash ending balance            =$9

You need to know what your starting balance is.  You should have it recorded in you accounting system.

Cash deposits into petty cash should have a verifiable method of record.  Numbered sales slips are sometimes they simplest way to create some controls when a point of sale system is not available.

Cash expenditures should be accounted for with a receipt.  When petty cash is used to buy something the change and a receipt should be included with the petty cash.

Cash should be balanced back to the original amount on a regular basis.  Daily or weekly balancing is ideal but monthly would be a minimum.  The expenditures and income then needs to be recorded in your accounting.  In QuickBooks Petty Cash should be added as a bank account.  Standard income transactions and expense transactions or general journal entries can be used record the flow of the money.  Templates for petty cash logs are available to customers of Fogged In Bookkeeping upon request if you don’t have one already!