Many businesses keep a small amount of cash in the office for incidental expenses. If you, the owner, is away and there is a small expense that has to be paid, it would be appropriate to do so out of Petty Cash. You don’t want to leave the money laying around unattended, though, not even in a desk drawer.
Below are some suggestions that should be followed in order to keep your Petty Cash safe:
Keep the cash in a locked box.
The location of the key should only be known to you and the person who is responsible for Petty Cash.
Record every transaction, no matter how small. The entry should include the date, amount, and purpose for each expense.
Require receipts for all transactions.
It should be a strict rule that the Petty Cash fund is never used for a loan to employees.
Do not accept personal checks in exchange for cash.
Reconcile the Petty Cash on a regular basis, preferably monthly.
A check should be issued to replenish Petty Cash. The correct entry is to debit the expense accounts and credit cash.
For most businesses, a Petty Cash fund of $25 to $50 is plenty.
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