Every business makes small purchases each day for items such as office supplies, stamps, shipping charges, and other items.It is expensive to write a check for such items.A small business owner can maintain control and account for their expenditures with a small cash fund.It is possible to set up and manage a cash account with a few steps.
Step 1: You can purchase a lock box.
When starting a cash fund, you need to buy a lock box that will hold the cash available for use and the receipts for what has been spent.You need a small metal box that can fit in a desk drawer.The box can either have a combination lock or a key lock.To deter people from tampering with the box, it needs to be extremely secure.You need a box large enough to hold all the money and receipts, but small enough that you can easily hide them.You should get a money tray if you want bills and change to be easy to organize.These can be found in most stationery or office supply stores.
Step 2: The petty cash fund should be assigned responsibility.
Once you have a place to store the money, you need to assign an individual in charge of the account.The person you assign should be available to any employee who might need money, such as an accounting clerk or an administrative assistant.The custodian or cashier of the cash box is in charge of disbursing funds in return for written receipts, replenishment of funds when needed, and recording items purchased or paid for.
Step 3: The cash box should be kept in abeyance.
Cash boxes should be kept out of sight.The custodian should be able to get to the drawer in the desk.The box should be kept in a drawer that is not on the key chain of the custodian.If you have more than one custodian, it depends on who else needs access to the box.A lock can be added to the drawer you keep the box in.The money is kept there and it would provide additional security.If you have more than one person who needs access to the cash box, think about having multiple keys made or finding a box that comes with additional keys.
Step 4: The withdrawal limit should be determined.
It is not intended to replace accounting control of expenses.It’s set up to be used for small purchases that don’t warrant writing checks.The maximum transaction amount needs to be established.Any transaction above that amount can be handled through the normal purchasing process.A company might limit cash transactions to $50 or less.Any transaction over $50 would be processed as a normal account payable.
Step 5: The cash fund can be deposited with cash.
You need to put money into cash once you have the basics covered.To establish the fund, you should write a check.The check amount should be sufficient to handle most cash purchases, but not so large as to encourage theft.The money should be deposited into the cash box after the check is cashed.The beginning amount is between $100 and $500.You should keep all of the bills in the drawer.You should have $20, $10, $5, and a small amount of $1.You should have coins as well.It will be easy to reimburse cash payments.
Step 6: A cash transaction log can be created.
The custodian should start a log of the transactions with the first initial payment.An online spread sheet can be kept up with by the custodian.The custodian should keep a log of transactions.A line is needed for the description of the transaction.There needs to be a column for the amount spent and the person who used the cash.There should be a column for deposits to the account to keep track of when the fund is reloaded.The first payment should be placed in the log.The transactions can be deducted from this amount.
Step 7: The accounting records of the company should have a small cash fund on them.
Both of the accounts are asset accounts.The balance of the organization’s assets are unaffected when cash is transferred from one account to another.You should keep a separate account for the petty cash fund once it becomes its own entity.The transactions that are made to the company’s account should be a credit from the cash account for the amount of the check.You can deduct the transaction from the account to establish its initial balance, which will be the amount you deposit into the fund.The total assets of the company have not changed because the money has been transferred from one account to another.
Step 8: Start using the money.
The business can use the cash in the box for small transactions once they have enough.The custodian should have a receipt for cash purchases.The custodian should note the purchaser’s name and date on the receipt and deposit it in the cash box.The custodian should give the purchaser an exact change for the purchase.In order to buy something, the custodian can give an advance on cash.The company can come up with a way for a person to get a cash advance if they buy something.The custodian can mark the purchase in a log to show how much is needed and what the purchaser intends to buy with the cash advance.The purchaser should return to the custodian with the receipt and change after buying the products he set out for.
Step 9: replenish the cash
The accounting clerk needs to replenish the cash in the fund frequently.Each time the fund is reloaded, the custodian should start a new log.The custodian should give the completed list to the accounting clerk.The custodian will receive a check for the total amount spent in order to replenish the fund.After cashing the check, the custodian deposits the funds in the petty cash box.If there is a larger amount in the box, you may never use all of the petty cash.The clerk can replenish what has been taken out once a month in order to keep track of expenditures and help with the accounting of the cash.You can increase the balance of the fund at any time if you find that you need more money.The accounting clerk can write a check to the custodian for the extra money.If the $100 initial balance is insufficient to pay the expenses the majority of the time, increase the fund to $200 by writing a check for a second $100.The normal procedure for replenishment should be followed by the custodian.
Step 10: There is an account for the cash transactions.
Once the list of transactions from the cash custodian is complete, the accounting clerk will confirm that a receipt is present for each transaction, and that expenditures are properly added to calculate the sum.He should take each receipt and divide it into different expense categories.Postage, office supplies, and transportation are some of the common expense categories.Since an individual small expense is insignificant in the operation of the company, there is no need to make an entry for each transaction.Under each category, log them as complete sums.It is important that the total amount of receipts is the same as the initial amount.It is possible that a purchase was not accounted for.If you had $100 in the account, you should have 100 in receipts.Most of the time the initial cash goes to 0.The receipts should show the difference between the initial cash and the remaining cash.The check for reimbursement needs to be equal to the total of the receipts to bring the cash fund back to its original balance.
Step 11: Log the expenditures.
The accounting clerk should record the expenses associated with the petty cash receipts after sorting and totaling the receipts.He should credit the cash account first for the total amount of reimbursement, which reduces the balance of the main account by the same amount.The individual expense accounts should be debited for the sums spent in them.The credit of the cash account will be equal to the total debit in the expense accounts.If you have $200 in cash, you need to record it in the appropriate expense accounts.The office expense account would be debited if all the $200 were office expenses.The amount spent in each category will affect the accounts for each type of expense.The amount spent on the expense statement will affect the company’s net income.