These funds are maintained at minimum levels in order to discourage theft and should not exceed the amount necessary to settle small accounts over a one month period. Youll also want to purchase a lock box for the cash and receipts. To protect those who are handling money, there should always be two persons present when opening cash collection boxes, pay phones and other boxes with uncounted cash. Petty cash management systems are usually imprest systems. Because of its accessibility, petty cash funds tend to be susceptible to abuse and misuse. When you set up a petty cash fund, you provide a way to cover some unexpected work expenses incurred by your employees or your business. A surprise cash count of each petty cash fund, including a. Below is the key information that should be included in your petty cash policy and procedures. Once, approved, a locking cash box needs to be obtained. It is important to trust your employees when they would be using the fund but it is also right to take precautions. Managing a petty cash account for your small business. Start a petty cash fund by writing a check drawn on your company to petty cash. To change the primary or alternate custodian on a petty cash fund, complete the request to change petty cash custodian form.
What internal controls are needed for cash disbursement. Petty cash funds are used primarily for small expenses in the business. Petty cash is a system for keeping track of small, random business purchases that can. Obtain proper approval for all disbursements and create a permanent record of each disbursement. Best practices for cash control the procedures listed below are the best practices to accept, store, reconcile and deposit, document, and transport deposits, for cash, checks and payment cards. Petty cash funds provide a convenient way to pay for small expenses, but keeping cash in any office entails risk of misuse or theft. Segregation of duties is a key internal control intended to minimize the. Policy the department head is ultimately responsible for the basic safety and control of the cash fund, regardless of who actually handles the transactions, and reimbursements. A functioning petty cash system includes internal controls to ensure that all. Cash control you have to introduce good control procedures concerning cash. A departments petty cash fund is used to reimburse allowable lowvalue expenses for items which generally cant be purchased through established ucsd procurement procedures. Petty cash fund procedure controller and treasury texas. Many ghanaian businesses have weak controls over petty cash. Discourage the use of cash floats at completion of administration setup.
Disburse cashcash equivalents only for valid business purposes upon proper authorisation. Accounts payable is responsible for writing checks and paying the companys bills. University policy the purpose of a petty cash fund is to provide cash to business units sufficient to cover minor expenditures. To facilitate minor business expenses, a petty cash fund will be available to employees. Types of cash typically on hand include cash receipts, petty cash accounts, and.
What internal control features exist in petty cash. Therefore, it is extremely important all departments handling cash implement and adhere to strong internal controls. To account for petty cash, create a transaction log that covers the date, the person who used the petty cash, a description of the transaction, and any other deposits or expenses. Petty cash should be properly controlled with a petty cash log and accurately entered into the bookkeeping system in exactly the same way you would maintain a bank account. Prior to a change in custody, a petty cash fund must be audited, reconciled, and reimbursed. Petty cash procedure guide statement this policy establishes the proper uses and administration of petty cash funds. Following are some basic control procedures for cash disbursements.
Oct 27, 2015 petty cash, cash over and short, bank reconciliation, voucher system, petty cash replenishment, internal control, sarbaneseoxley, public company, internal control components, control procedures. Identify which one of following statements is true regarding this protection. These controls are intended to limit access to cash to specified employees and verify that all receipts, refunds or transfers are documented correctly and in a timely manner. The petty cash custodian is responsible for the day to day maintenance of the petty cash fund, including. Such disbursements are a common problem in petty cash, where there is a high risk of fraud. Petty cash funds provide cash to units and departments to cover minor expenses, such as reimbursement of staff. Fund petty cash when cash is added to a petty cash fund, the basic concept is to replace the amount of any cash that had previously been disbursed from the fund.
Accounting and procedures for petty cash accounting guide. In accordance with university policy 2701 internal control policy management is responsible for establishing, maintaining and promoting effective business practices and effective internal controls. A departments change fund is used to provide change for cashiers and customers who pay by highdenomination bills. Internal control procedures for the receipt of cash help your small business prevent loss due to employee fraud and accounting errors. Cash is the most liquid of assets and is susceptible to loss if not properly controlled. Without audits, petty cash funds may be prone to misuse or poor management. Oct 14, 2018 to prevent petty cash frauds, the following internal control procedures for petty cash should be in place. It is important that the person who approves petty cash is not the petty cash custodian to avoid incompatible duties. If 20 people work in a business, but only three have access to the cash drawer or petty cash, then theoretically you have reduced the risk of abuse by 85%. This procedure applies to all employees of the company. A voucher system of control is a control system exclusively for cash receipts.
You have to separate company money from your personal money. The basic principle of segregation of duties also applies in controlling cash disbursements. Petty cash is a small amount of cash that any business can keep on their premises in a lockable container. There should be segregation of duties in disbursing and approving the petty cash fund. The petty cash fund is an accounting tool that helps you to manage and track small purchases that are not appropriate to make a check payment or using your credit card. Internal control procedures for the receipt of cash. A petty cash fund or custodian may be revoked at the discretion of the finance director. Petty cash facilities will only be issued where the applicant has. Petty cash policy example accounting forms cash funds. Petty cash accounting procedures reconciliation uses. Issue of petty cash facilities petty cash facilities will only be issued in line with this policy.
Petty cash may be used only for payments to human research subjects and related expenditures only from. Add a petty cash account to your chart of accounts if you do not already have one. These cash control procedures are based on uc business and finance bulletin 49 bus49 pdf and fall into 4 main areas, which are listed below. The petty cash procedure helps outline the disbursement and reimbursement of petty cash. When creating a petty cash account, be sure to document the origin of the cash you use to start with, and also keep a petty cash book to track your every petty cash purchases. Petty cash financial accounting cpa exam far ch 7 p 4. The use of petty cash funds should be limited to reimbursement of staff members and visitors for small expenses, generally not to exceed. Smaller or homebased businesses usually require the business owner to complete this function.
Policy on petty cash south african qualifications authority. To expedite the purchase of low value items, administrative staff are authorized to maintain a petty cash fund. Scg walk you through 7 steps to help you control your petty cash in a more secure manner. Cash controls are important internal controls for reducing embezzlement, temptation and opportunity.
A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly. It is when money is withdrawn from the bank account and used to purchase sundry small items. The amount of cash on hand should be kept to a minimum. Before the petty cash fund can be replenished, the person writing the check to the petty cash fund should agree all vouchers and cash on hand to the total petty cash fund.
Petty cash policies and procedures help business owners limit the amount of time they spend on their accounts payable process. To ensure your petty cash is appropriately used, perform periodic audits. Only the cashier collecting these monies should control over this cash, and. The intent of this activity is to see if there have been any undocumented disbursements. Petty cash fund procedures petty cash fund definition a small cash fund used to make incidental purchases where normal purchasing methods are not practical. A petty cash system is not a control procedure for safeguarding cash. Accounting guide for petty cash includes definition, journal entries, sample forms of petty cash voucher and journal, and detailed example of petty cash accounting and procedures. The day to day maintenance of the petty cash fund, including. Petty cash funds are for the purpose of infrequent or emergency departmental purchases. Petty cash management is a recordkeeping system to track the use of petty cash that businesses use to handle small expenses that arise over the course of the daily operations. These funds should be used only when cash is the most cost efficient method of payment. Procedures have been established to encourage effective administration and internal control of cash handling operations throughout the. Special care must be taken to protect such funds from theft or misuse. The accounts payable staff forwards the petty cash reconciliation form to the.
Start a petty cash fund by writing a check drawn on your. Petty cash, cash equivalents, change funds and special cash funds must be used strictly in accordance with the purpose for which they were established and authorized. When running a petty cash fund, the first thing you need. Dec 15, 2018 add a petty cash account to your chart of accounts if you do not already have one.
The petty cash fund procedure has been created to provide guidelines for the appropriate establishment, use, and accountability of such funds. If a disbursement request falls within the petty cash disbursement guidelines, unlock the container in which petty cash. They assume that because its a small amount of money, they do not need to pay attention to controls over how it is spent. Effective audits are unannounced and the purpose is to randomly check on the records, accounting procedures and control of your petty cash fund. Segregation of duties prevents employees from concealing errors or. Petty cash is strictly for businessrelated expense. Here are five easy steps and two tips you should take to set up a petty cash account for your small business. Which of the following is not an internal control procedure for cash. Petty cash procedure guide california state university. Petty cash policies and procedures do not use petty cash for. Employees may take money from the fund to cover a cost or receive reimbursement for expenses they already paid, depending on what system you prefer. Procedures should be put in place so that employees know how they can use cash to pay for small items. These instructions define the basic internal control procedures that all university departments are to follow relating to the collection and deposit of cash receipts. To prevent petty cash frauds, the following internal control procedures for petty cash should be in place.
Petty cash funds policy 3011 general purpose of petty cash funds petty cash is intended for. This involves summarizing all disbursements made and issuing cash back to the fund for that amount. Dont make the petty cash fund too large which may become subject of theft. Procedures have been established to encourage effective administration and internal control of cash handling operations throughout the university. A petty cash fund is cash in a secure lock box, which is used for small purchases and maintained by a petty cash custodian. Each petty cash fund established is specifically assigned to one individual who is designated as the fund custodian. Adhere to the minimum requirements and general procedures for case disbursements. Adequate receipts and documentation must be maintained to support all transactions made from the petty cash fund. Jun 22, 2019 fund petty cash when cash is added to a petty cash fund, the basic concept is to replace the amount of any cash that had previously been disbursed from the fund. If you are just a oneman band, you may find it easier to have a. A petty cash fund is initiated by a department heads request, in writing through the controller, with final approval of the vicepresident of finance. Travel expenses consulting or professional services awards contracts steps to take for petty cash reimbursement a reimbursement form from petty cash requires the submission of a petty cash voucher from the business office.
Disburse cash cash equivalents only for valid business purposes upon proper authorisation. Dec 12, 2017 a petty cash fund may be revoked at the discretion of the controller. The cashier deposits the check and converts the funds into cash. See the following links for more information about each area. All other purchases must go through the purchase order process via a requisitionrequest for payment. The disbursement procedure for petty cash is designed to provide sufficient documentation of each expenditure, as well as proof that funds were actually disbursed. Change funds are used by cash handling stations to provide coin and currency in order to make change during the process of receipting and disbursing monies. If you have a larger smb, you may want to set up petty cash accounts for each of your divisions. Assign one person to be in charge of petty cash, known as the petty cash custodian.
The procedures listed below are the best practices to accept, store, reconcile and deposit, document, and transport deposits, for cash, checks and payment cards. The fund status is verified by both the outgoing and incoming custodians, who must sign the form. This policy provides procedures designed to mitigate these risks. Petty cash management for your small business kissflow. Petty cash is intended for small payments, but in many businesses, petty cash becomes the primary fund for making cash payments. Make all disbursements by check or from petty cash. The first thing you need to do is document your petty cash procedures and communicate them to all employees.