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3 simple steps to petty cash

Sometimes businesses keep small amounts  of cash ($100 to $200) under lock and key be used by employees for small miscellaneous business purchases.    This petty cash, as it is called, is managed by the Custodian (cool name for someone in your finance department).  Here is what you need to know about how to handle this cash money.

Step One – Establish your Petty Cash

Withdraw the funds from your Operating bank account and give to the Custodian to be placed in a safe.

Journal Entry:
debit:  Petty Cash        $100
credit:  Operating Acct     $100

3 Simple Steps to Petty Cash

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Step Two – Using Petty Cash

Employee submits a Petty Cash Voucher and exchanges it with the Custodian for Cash.
After purchases, the employee returns with the receipt and change which are both placed in the safe.

 

Journal Entry:
debit:  Expense Acct        $100
credit:  Petty Cash            $100

 

Step Three – Replenishing your Petty Cash

When the Petty Cash fund gets low or at month end, write a check to the Custodian.
The Custodian will cash the check and replace the cash in the petty cash safe.

Journal Entry:
debit:  Petty Cash        $100
credit:  Operating Acct      $100

Not to be petty but…wasn’t that simple?  Ciao for now…Allison

3 Things You Need to Know About Petty Cash

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 Visual Learner?  Check out this neat little Petty Cash Infographic I made.

ALLISON ARNETTComment