Top Five Petty Cash Fund Tips

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Top Five Reasons Why A Business Might Want To Use A Petty Cash Fund

1) The owner does not have to be available 24 hours to write a cheque for every little expense all of the time
2) To have the ability to make change for your customer wanting to pay an invoice on account
3) To reimburse an employee replenishing office supplies they had purchased for the business
4) To systematically keep track of all cash purchases in one logical place
5) To give an employee greater responsibility in helping running the affairs of the business

Top Five Reasons Why A Business Might NOT Want To Use A Petty Cash Fund

1) To avoid having the fund be available to cash personal cheques
2) To avoid having the fund be available to advance loans to employees
3) Paying too much ‘casual’ wages under-the-table by cash can create huge problems for a business
4) Shrinkage or theft of petty cash amounts
5) Employees ordering merchandise without employer’s knowledge and paying for it out of the Petty Cash Fund

Top Five Tools You Need To Keep A Proper Petty Cash Fund

1) pettycashbox Petty Cash Box
* To hold your cash in one spot
* A place to keep receipts (underneith the cash) in one spot

2) pettycashvoucher Petty Cash Vouchers
* To record money removed from the fund
* A place for recipient to sign like an I.O.U. to acknowledge receipt of funds
* Could be used to authorize by upper management that it was okay to request petty cash advance

3) CalculatorTape Calculator Machine with Tape Roll
* Every office needs a good calculator machine with tape roll!
* It’s easy to do a ‘tape job’ of receipts and all them all together

4) redstapler A Good Sturdy Stapler
* That can staple lots of receipts together with ease
* That won’t keep breaking staples and falling on the floor where you can step on staples and hurt your feet

5) envelopes Envelopes
* To hold similar type receipts to keep in good condition for 6 years for the taxman!
* I like to just add up all the tapes, of similar expenses, calculate GST ITC’s included, tape the receipts together, then write the amount recapped on the face of the envelope and staple the envelope closed permanently
* It’s easier to staple an envelope to the Petty Cash recap than a lot of individual and different sized receipts

Top Five Journal Entries You Might Incur Related To Petty Cash

1) Coding Your Cheque Stub to create a new “Petty Cash” fund level of $1,000

JOURNAL ENTRY

DEBIT

CREDIT

DR. PETTY CASH ACCOUNT (B/S)

1,000.00

 
  CR. BANK ACCOUNT (B/S)  

1,000.00

2) Deposit Excess Cash from Petty Cash Fund back into your bank account

JOURNAL ENTRY

DEBIT

CREDIT

DR. BANK ACCOUNT (B/S)

500.00

 
  CR. PETTY CASH ACCOUNT (B/S)  

500.00

3) Petty Cash Voucher was given to employee to purchase supplies, but the employee did not provide back the receipt for the purchase or acquisition

JOURNAL ENTRY

DEBIT

CREDIT

DR. EMPLOYEE ADVANCES A/R (B/S)

200.00

 
  CR. PETTY CASH ACCOUNT (B/S)  

200.00

4) To record the recap journal entry provided by 1-800-HART for the taking! (see #5)

JOURNAL ENTRY

DEBIT

CREDIT

DR. OFFICE SUPPLIES (I/S)

107.00

 
DR. GST ITC A/R (B/S)

7.00

 
  CR. PETTY CASH ACCOUNT (B/S)  

114.00

DR. COURIER AND DELIVERY (I/S)

50.00

 
DR. GST ITC A/R (B/S)

3.50

 
  CR. PETTY CASH ACCOUNT (B/S)  

53.50

(etc)

5) Replenishing the Petty Cash Fund

JOURNAL ENTRY

DEBIT

CREDIT

DR. PETTY CASH ACCOUNT (B/S)

750.00

 
  CR. BANK ACCOUNT (B/S)  

750.00

OTHER TOP FIVE TIPS RELATED TO PETTY CASH

1) Take the excel (version 7.0 for windows 95) template that 1-800-HART has created .. stuff for the taking!
1800HART.com_Template_PettyCashForm.xls

pettycashfundrecappettycashfundjournalentry

2) TO SEE HOW MUCH CASH IS AVAILABLE IN THE FUND – PERPETUAL CALCULATION
* If you use the form (for the taking) that I have created in excel, what you will be able to monitor is the available cash perpetually by looking at the cumulative running balance of cash – according to the recap form – that is in the fund
* At any point that is determined that there is a low balance in the running balance column, a cheque should be issued to “top” the fund to equal back to the original fund level that was initially created. For instance, if the running balance is $200.00, then you would write a cheque for $800.00 to bring it back up to the $1,000.00 level

3) TO SEE IF ANY PETTY CASH IS MISSING
* This is easy – if you set your fund to be $1,000.00 .. at any time you should be able to go into your petty cash box and add up all of these figures:
+ Count all of the Actual Cash
+ Count all of the receipts
+ Count all of the vouchers for cash removed and receipts not yet provided
= >> $1,000.00

4) Do not record any expenses if there are no original receipts.
* Petty cash should not be removed without signing a petty cash voucher, and if the employee does not (or repeatedly does not) provide official receipts to account for the expense … add the cash withdrawal to his/her wage and T4 the amount. Businesses are responsible for maintaining records for at least 6 years.

and

5) Petty Cash disbursements are not always “OFFICE EXPENSE”
* You can pay for product purchases
* You can pay accounts Receivable refunds
* You can buy office equipment or other assets for cash
* You can pay out a commission or wage costs
* Anything you can pay by cheque can certainly be paid by cash
* Petty Cash funds is not only for PAYOUTS but.. can be used for collections too! (Although, a Daily Deposit or Cash Receipts journal recap should be considered, rather than maintaining it through the Petty Cash Fund)

Take care.
HART

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