Sign Up for Discounts
This form does not yet contain any fields.

    Home >> Accounting Procedures

     

    Petty Cash Procedure


    Fund Petty Cash

    When cash is added to a petty cash fund, the basic concept is to replace the amount of any cash that had previously been disbursed from the fund.

    This involves summarizing all disbursements made and issuing cash back to the fund for that amount. The procedure for petty cash funding is outlined below:

    1. Complete reconciliation form. Complete a petty cash reconciliation form, in which the petty cash custodian lists the remaining cash on hand, vouchers issued, and any overage or underage. The voucher information may come from the petty cash book. An accounting staff person reviews and approves the form and sends a copy to the accounts payable staff, along with all vouchers referenced on the form. The petty cash custodian retains a copy.
    2. Obtain cash. The accounts payable staff creates a check made out to the cashier in the amount needed to fund petty cash to its stated limit. The cashier deposits the check and converts the funds into cash. The accounts payable staff forwards the petty cash reconciliation form to the general ledger accountant.
    3. Add cash to petty cash fund. The cashier gives the cash to the petty cash custodian, who includes it in the petty cash fund. If there is a petty cash book, the custodian enters the amount of the cash received in the book, and updates the running total of cash on hand.
    4. Record vouchers in general ledger. The general ledger accountant records the voucher amounts listed in the petty cash reconciliation form as expense in the general ledger, and then files the form and attached vouchers.

    Disburse Petty Cash

    The disbursement procedure for petty cash is designed to provide sufficient documentation of each expenditure, as well as proof that funds were actually disbursed. The petty cash disbursement procedure is outlined below:

    1. Screen disbursement requests. Disburse funds only for minor business expenses.
    2. Unlock petty cash. If a disbursement request falls within the petty cash disbursement guidelines, unlock the container in which petty cash is stored. For security reasons, the petty cash fund should be locked at all times when it is not in use.
    3. Complete voucher. The person being reimbursed completes a reimbursement voucher. This voucher should contain the amount disbursed, the type of expense, the date, and the person to whom the petty cash was paid. If there is a receipt for which the person is being reimbursed, staple it to the voucher. This step is needed to track the types of expenditures being made, which can then be charged to various expense accounts.
    4. Disburse cash. Count the cash being disbursed, and have the recipient count it as well, to verify the amount being paid. The recipient of cash should then sign the voucher; this provides proof that the custodian did not fill out the voucher and simply pocket the corresponding amount of cash. Store all completed vouchers in the petty cash box.
    5. Update petty cash book (optional). Whenever a voucher is completed, the custodian should immediately update the petty cash book by adding the amount, type, and date of the expenditure and updating the running cash balance. This information can also be maintained on an electronic spreadsheet.

    Related Topics

    Bank reconciliation procedure
    Cash receipts procedure 
    Electronic payments procedure
    Payroll processing procedure