Find an accountant<\/span><\/a> or a petty cash cashier to help in issuing checks to fund the petty cash account, make the necessary accounting entries, distribute the petty cash, and keep receipts for any petty cash transactions.<\/p>\nWith a petty cash custodian and cashier, we can confidently say your funds are secure.<\/p>\n
Recording Petty Cash<\/h2>\n
Petty cash transactions, like any other financial transaction, must be recorded on financial statements. So how do you record petty cash in accounting?<\/p>\n
Remember, recording journal entries only happens when the custodian needs cash replenishment. And they must provide the receipts.<\/p>\n
For the custodian to have more money, the petty cash account gets debited and the cash account credited in the journal entry. If there are overages or shortages, a journal line entry is recorded to a cash short\/over account.<\/p>\n
Where the fund is excess, you enter a credit indicating gain. Where it’s short, you record a debit representing a loss. Upon reconciliation, one uses the short\/over account to force-balance the fund. <\/p>\n
Reconciling Petty Cash<\/h2>\n
Occasional reconciliation of the petty cash ensures the correctness of the petty cash balance.<\/p>\n
Once the amount in the drawer falls below the present amount, the custodian has to request replenishment from the cashier. During this process, comparisons between the dispersed cash from the petty cash box and receipts ensure they balance.<\/p>\n
If the custodian needs more cash, the cashier issues a check to add the cash to the petty cash box in exchange for the purchase receipts.
\nThe primary purpose of the reconciliation process is to ensure that what’s in the drawer and what’s in the invoice and receipts equals the original amount. Where it’s more, an overage exists. Similarly, if it’s less, there’s a shortage.<\/p>\n
Although it’s common to experience some minor differences, it’s good to identify where the discrepancy is coming from and, if need be, correct it. <\/p>\n
Petty Cash Vs. Cash on Hand<\/h2>\n
Petty cash and cash on hand can be confusing sometimes. However, the two mean different things.<\/p>\n
Petty cash is specifically the money (bills and coins) that a company sets aside for minor expenses. The reason for having a petty cash drawer is to make it easier and more convenient to pay for expenses that otherwise look impractical using a credit card or check.<\/p>\n
On the other hand, cash on hand refers to any accessible cash that liquid funds or businesses have. It can be real money that you’re yet to deposit into your bank or coins and bills in the cash box that you use to give a change to your customers.<\/p>\n
The difference between the two is all about where you keep the cash and how you use it. While petty cash is intended for internal expenses by your employees, cash in hand is received or reimbursed to customers.<\/p>\n
Advantages and Disadvantages of Petty Cash<\/h2>\n
Petty cash has its benefits while, at the same time, disadvantages. <\/p>\n
Pros<\/p>\n
\n- It’s the most convenient, easiest, and simplest way to pay for minor impromptu expenses.<\/li>\n
- It’s highly accessible when direly needed. You need no planning in advance or authorization to get the cash.<\/li>\n
- It’s the best source of funds for emergencies.<\/li>\n<\/ul>\n
Cons<\/p>\n
\n- It has its security risks. Petty cash is difficult to track, can be stolen or even misused.<\/li>\n
- It involves manual record-keeping, which is outdated.<\/li>\n<\/ul>\n
Take Away<\/h2>\n
Petty cash is the ideal solution for minor purchases and small expenses in a company. It saves you the hassle of paying for such purchases and expenses from your account and flooding your accountants with receipts. <\/p>\n
Mind you, technology is inventing new ways of doing things, and although large companies may see petty cash fund management as a nuisance, it’s essential. Petty cash accounting is vital for every business, and we cannot ignore its benefits to any company, large or small.<\/p>\n","protected":false},"excerpt":{"rendered":"
For bookkeeping purposes, it’s imperative to keep accurate records of every petty cash expenditure in your business. Any time a petty cash fund is in use, you need to record the transactions on your financial statements. Every single coin counts, and for your business to be successful, you have to do accurate petty cash accounting. …<\/p>\n
How to Do Petty Cash Accounting<\/span> Read More »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1382],"tags":[],"_links":{"self":[{"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/posts\/8594"}],"collection":[{"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/comments?post=8594"}],"version-history":[{"count":0,"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/posts\/8594\/revisions"}],"wp:attachment":[{"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/media?parent=8594"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/categories?post=8594"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vettedaccountants.ca\/wp-json\/wp\/v2\/tags?post=8594"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}