Some business purchases are unexpected and small; it is convenient to have some cash on hand to cover them. A petty cash box is the simplest way to keep small amounts of cash on hand in a business environment. The petty cash box is set up so that all expenses are recorded and every dime in the petty cash box is accounted for.
Things You'll Need
- Petty cash box
- Account ledger
Review the previous month's transactions to estimate how much money you would have used if you had a petty cash fund at that time. This gives you a good idea how much money you need to start your petty cash fund. For example, if you spent $44 on stamps, $60 for repair of the copy machine and $100 on new printer ink, it makes sense to start your petty cash fund with a little over $200.
Assign one person to be in control of the petty cash box. The American Institute of Professional Bookkeepers refers to this person as the petty cash custodian. The custodian should be trustworthy and knowledgeable in basic bookkeeping.
Write a check out to cash with "Petty Cash" written in the memo. Cash it, and place the cash in the petty cash box. The petty cash box should fit in a drawer or filing cabinet but must have a lock on it.
Place a small account ledger on top of the cash in the box. The first entry in the ledger reflects the total amount of cash you placed in the petty cash box. Any withdrawals from the petty cash box must be recorded and subtracted from the total. Date, amount and description should all be recorded on the ledger with each transaction.
Close and lock the petty cash box.
Replenish the petty cash once per month. Make adjustments as needed. For example, if you have a larger volume of business activity during the Christmas holiday, you may want to have a extra petty cash on hand during the months of November and December.