Petty cash means spending small amounts on business and keeping track of them. Petty cash is constantly spent in the company for various needs. It is a common practice for companies to have a petty cash fund to handle small expenses that occur frequently. In this article, we will discuss the meaning and importance of petty cash in business operations. If you try to understand the meaning of petty cash well, then it will be much easier to keep track of your company’s petty cash expenses. Through this article, you can easily know about petty cash meaning.
Why give more importance to petty cash expenses?
Petty cash is often maintained in a physical cash box, with a designated person responsible for keeping track of transactions and handling reimbursements. It is typically a few hundred dollars. Petty cash can be used for a variety of expenses that are too small to justify the use of a credit card or a check. Some examples of expenses that can be covered by petty cash include:
- Postage stamps
- Office supplies such as pens, paperclips, and staplers
- Refreshments for meetings or events
- Taxis or other local transportation expenses
- Minor repairs or maintenance
Petty cash is often managed by an office manager or administrative assistant who is responsible for distributing and reconciling the funds. To ensure the security and accuracy of the fund, a set of guidelines and procedures should be established to manage the petty cash system. The first step in managing petty cash is to establish a petty cash policy, which should outline the procedures for handling and recording transactions. This policy should include the following:
- The maximum amount of money that can be withdrawn from petty cash.
- The types of expenses that can be covered by petty cash.
- The process for requesting and receiving petty cash.
- The person is responsible for managing the petty cash fund.
- The frequency of reconciling the petty cash fund.
Once the petty cash policy is established, it is important to maintain accurate records of all transactions. This can be done by requiring receipts for all expenses and keeping a log of all petty cash transactions. At the end of each accounting period, the petty cash fund should be reconciled to ensure that the amount of cash in the fund matches the amount of money that has been spent. If a company can properly manage its petty cash expenses, it will be able to be more profitable in business and able to raise funds.
Conclusion
In conclusion, petty cash is a small amount of money kept on hand to cover incidental expenses that arise in the course of business operations. It is a useful tool for businesses that have frequent small expenses that are not worth using a credit card or check for. To manage a petty cash system effectively, a clear policy and procedures should be established, and accurate records should be kept of all transactions. By following these guidelines, businesses can ensure that petty cash is used appropriately and effectively.