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Business Financials –Good Petty Cash Management for Business – What to set up & Record in the accounts

images/PettyCashTin.jpgIn most small businesses there is a need to make small cash purchases, and this requires good petty cash management for the business – so what do you need to set up & record in the accounts?. It is important to set up a Petty Cash tin to keep control of those purchases. Buy a metal cash box from the newsagent or Officeworks store.

To set up the Patty Cash, go to the bank and withdraw say $100 – ask for it in a selection of notes and coins.  The value of this box should remain at $100.00 at all times.

When you or an employee needs to buy a small item eg a notebook at the local office supply store for $7.00, they take say $20 with them from the Petty Cash tin (good to use one of the plastic money bags the bank uses to bundle coins), using money from the Petty Cash Box. When you get back to the office you will put your receipt and any change in the box. Now you should have $93.00 in notes/coins and one receipt for $7.00. The value of your box is still $100.00.
You continue using the Petty Cash Box until you get low on cash. Then replenish the box by withdrawing cash at the bank for either enough to get back to $100, or the full $100 (if all is spent).

In your accounting records, there should be a credit from the Bank account (to show the withdrawal), and a debit to the Petty Cash Account. Then record each expense going by the receipts, crediting the Petty Cash account (“spending” the cash) and debiting the relevant expense account eg stationery/office supplies, fuel, staff amenities (tea and coffee, etc).

If there are several receipts for the same expense type, eg staff amenities, you could total them all, staple together and record the total in the accounts, with a memo such as “total fuel several receipts”.

What tips do you have? Share them with us here!

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
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