Explaining Petty Cash Management and How to Implement It
Explaining Petty Cash Management and How to Implement It
Petty cash is the tiny amount of money that each division or department keeps on hand for paying for unexpected or low-cost needs. The imprest system is the foundation of petty cash and petty cash management systems.
A seed sum is allotted and credited to the petty cash fund. The money will be available for use by the branches for miscellaneous purposes. When the reserve reaches a target amount, you can add more money to it.
A petty cash fund is usually kept in a secure location, such as a locked box, by most offices and divisions. The opening, care, and reporting of petty cash is within the purview of a petty cash custodian.
Petty cash management aids organisations in keeping track of their smaller cash reserves. This method of accounting for small expenditures provides assurance that all of the money has been properly accounted for. These little purchases from your petty cash account might build up to a big sum over time.
Petty cash expenditures can be recorded in the general ledger just like any other business expense. Moreover, accounting book entries and petty cash receipts can be reconciled on a periodic basis.
Maintaining accurate records of petty cash transactions is an important internal control for safeguarding this cash. Most businesses have their own method of handling petty cash, whether it's through human bookkeeping or an automated system.
The Definition of Pocket Money
Often called "cash on hand," petty cash is short-term funding used for small purchases. The word comes from the French meaning "little" and can refer to a number of different types of offices, sections, or departments.
Petty cash is used to make small change for consumers who pay with cash for goods or services at a business.
Expenses incurred by workers while performing their duties for the company are subject to reimbursement.
Petty cash can be used for any modest purchases that involve paying in cash.
Petty cash refers to a tiny stash of money kept aside for paying for miscellaneous or modest costs. It's not uncommon for these costs to be too modest to warrant using a check or a credit card for payment.
Petty cash refers to a tiny stash of money kept aside for paying for miscellaneous or modest costs. It's not uncommon for these costs to be too modest to warrant using a check or a credit card for payment.
Petty cash is kept in a separate account for most small firms. Yet, major firms and businesses with multiple offices will have separate petty cash funds for each branch or division.
It's important for firms to have petty cash because.
1. Some costs are inadequately little.
Put yourself in the position of requisitioning new stationery or office supplies from your workplace. The first good news is that purchasing new stationary won't break the bank. Second, the sum is too little to issue checks or make a debit from a bank account.
Put yourself in the position of requisitioning new stationery or office supplies from your workplace. The first good news is that purchasing new stationary won't break the bank. Second, the sum is too little to issue checks or make a debit from a bank account.
In such a situation, cash might be more convenient. For this purpose, Petty Cash is ideal. Having access to petty cash for these kinds of costs ensures that branch operations run smoothly. The worker can use the petty cash account and keep track of the money spent.
At the end of each month, the custodian will compare the balance to the amount that was accessible on the first of the month.
2. Benefit is increased productivity.
It can be difficult for branches to function autonomously if all money must be sent back to the central office or department. That only compounds the difficulties at headquarters.
It can be difficult for branches to function autonomously if all money must be sent back to the central office or department. That only compounds the difficulties at headquarters.
Petty cash is a useful tool for fostering autonomy across different divisions or departments, provided that the necessary safeguards are in place. In addition, because petty cash transactions are often for smaller sums, they are also easier to trace and reconcile.
