A company typically uses petty cash to make small purchases or reimburse employees for minor expenditures. Each month, accountants or other employees will need to balance petty cash and replenish the funds. This process should not take too long, as petty cash on hand is a small amount, often less than $100 for small companies. Large companies may have petty cash accounts holding up to $500 or more. The reconciliation procedures, however, are not different regardless of the amount in the petty cash funds.
Write the normal petty cash figure on a sheet of paper. This figure is the opening cash amount for petty cash, such as $100.
Count the cash currently in the petty cash box or drawer. Subtract the total on-hand cash from the opening balance.
Total the receipts that detail petty cash expenditures. Deduct the receipt totals from the figure in Step 2. Petty cash will balance if these two items net to zero.
Research differences from the calculation in Step 3. Look for missing receipts, recount the cash on hand and ask employees about any non-reported uses of petty cash.
Replenish petty cash funds by requesting cash equal to the receipts. Owners or accounting managers usually have the authority to request cash advances for replenishing the petty cash box.
Always use detailed procedures for petty cash uses. A management-authorized slip should be necessary to give an employee petty cash for small expenditures.
- "Fundamental Financial Accounting Concepts"; Thomas P. Edmonds, et al.; 2011