Setting up and Maintaining a Petty Cash Account

It is easy to set up and will save you from writing a lot of small checks or using your personal funds.

Most businesses keep $100 in petty cash. The amount is up to you.

Decide where you are going to keep it. It should be in a locked box that only you or a designated employee has the key to.

If you have a double entry bookkeeping system, the initial recording entry would look like this:

DR Petty Cash $100

CR Cash $100

If you are using a computerized accounting system such as QuickBooks, you would use the check-writing window and fill it out exactly like your actual check. Then post it to a newly created “bank account” titled Petty Cash.

Using your Petty Cash Account

Print out a petty cash form or petty cash voucher and keep in the locked boxed with your petty cash.

When you need to make a small purchase such as a book of stamps, take a ten or twenty out, make your purchase, and when you return...put the receipt (remember to always get a receipt) and change back in the box.

Record the date, amount, and type of transaction on the petty cash form.

When your petty cash fund gets low, you will need to reconcile and replenish it.

Reconciling and Replenishing your Petty Cash Account

You will need to reconcile your petty cash account before you replace the money in it.

Begin reconciling by adding up all the transactions on your petty cash form. This total plus the cash still in the box should equal $100 or whatever you originally put in the box.

Next write a check for the exact amount of the total expenses and replenish the account.

Record that check by posting the total expenses to the proper accounts. An example would be if the petty account form listed $36.75 in office supplies, $17.60 in stamps, and $6.25 in miscellaneous expenses, you would record that replenish check for $60.60 as follows:

DR Office Supplies $36.75

DR Postage $17.60

DR Misc. Expense $6.25

CR Cash 60.60

Finally file your receipts and petty cash form. Note: For small expenses like tips that you cannot get receipts for...your petty cash form or petty cash voucher will be your source document.

Remember...at all times...the amount on of your petty cash form and cash in your petty cash box should always equal the original amount you started with.

Follow these simple petty cash procedures and save yourself a headache at tax time. It’s a great way to keep track of those small ticky tacky expenses that sometimes gets overlooked at tax time.

Return to home page from Petty Cash Account