What is Petty Cash

What is Petty Cash

Definition of Petty Cash:

“Petty cash” describes the cash a company keeps at hand for unexpected expenditures. It is also known as Imprest fund, Petty cash fund or Pocket money. Companies utilize petty cash (Also see Managing Petty Cash in Business: Pros and Cons) to ease reimbursement for staff members who have made minor business purchases. It’s essential to comprehend the way imprest funds can be made use of if you’re an entrepreneur. Entrepreneurs normally keep some money in a secure lockbox for unexpected expenditures. A petty imprest fund account offers a simple way for staff members to purchase for the postage fee, additional supplies they probably require, or snacks they probably spend for a conference with a customer.

How Petty Cash Works

Usually, the company would account for the imprest fund by using the ordinary systems or imprest systems of the cash book that an accounting firm in Johor Bahru later uses to prepare the accounts. Adhere to these procedures when you’re establishing petty cash to make sure the petty cash and its usage are accounted for:

  1. Fix the amount of imprest fund and enter it into a journal (Also see Journal Entries for Accounts Payable Account).
  2. Open up an account for it and name the account “Petty Cash”.
  3. Keep the receipts and invoices after a transaction.
  4. Integrate the ledger, receipt, and funds regularly that assist you in keeping on track of the account.
  5. Record every transaction amount in your journal periodically.
  6. Replenish the petty cash if needed so you can balance your ledger (Also see Accounting – General Ledger) and replenish the cash for other expenditures.

It’s vital to record your imprest fund usage in your book of account since it’s an expenditure recorded in accounting (Also see Management Accounting – Budgeting and Forecasting Techniques) records. Relying on the kinds of expenditures, you may also have the ability to declare itemized deductions. Usually, the company would entrust a petty cashier to manage the account. The petty cashier is tasked with recording the debits and credit to the petty cash account, authorizing reimbursements, and issuing cash to secure the account.

You should set policies regarding the amount of the imprest fund account can cover and which expenditures can be reimbursed. You might require modifying the imprest fund amount you have chosen at first; but soon, you will find out the best level to set it.

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