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The Corporate Finance Institute Accounting
Petty Cash
Although there is normally only one cash account in most company’s
statement of financial position, petty cash is a current asset account under
the more general “cash” account. Petty cash refers to the notion that every
business needs cash on a regular basis, whether to pay for office supplies,
mail services or meals. Therefore, businesses keep some cash on hand,
called petty cash, for any unexpected expenses.
Obviously, companies don’t want to have lots of cash just sitting around
in the office. Petty cash amounts vary between companies but may be
anywhere from $50 to $1,000. Companies that spend more or less cash
than expected may adjust their petty cash balances accordingly. Petty cash
can often be used to reimburse employees for small expenses as well.
No matter the balance, it is important for companies to set up a good
internal controls system that can keep track of all cash inflows and
outflows from the petty cash account. For example, anyone that comes
into contact with petty cash should be required to write their name, date,
time and specific amount and description of the transaction. All these
details are usually completed through a petty cash voucher/worksheet.
The best way to control petty cash is to designate one person in the office
to manage the amount. Petty cash vouchers can come in many different
forms but all generally require similar information. An example of a petty
cash voucher may look like this:
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