Let's Define Petty Cash

How Does Your Business Control it?

Petty cash is a small amount of cash that is kept on the premises of a business in order to make incidental cash purchases and reimbursements, such as for delivered meals. Petty cash can mitigate the effects of the more cumbersome accounts payable process.  The essential petty cash process is to authorize the payment of a certain amount of cash (such as $300 in bills and coins) into a petty cash fund, which is then controlled by a petty cash custodian, such as the office manager.
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The petty cash custodian pays out cash as requested in exchange for some form of evidence, such as a receipt or a voucher. The aggregate total of all remaining bills, coins, and evidence of receipt in the petty cash fund should always match the authorized amount of cash for that fund. Once the amount of bills and coins in the fund runs low, the custodian takes the receipts and vouchers to the accounting department and swaps them for a replacement amount of bills and coins. This cash replacement brings the total amount of cash in the fund back up to the originally authorized amount of cash.

​The mishandling of petty cash could paint the wrong picture for management as they review and forecast revenue for the business.  The Houston Chronicle published an article providing 5 steps on "How to Keep Track of Petty Cash", review article and share with a colleague.

Source: AccountingTools