Many businesses keep a petty cash fund to pay for small daily business expenditures such as office supplies. To set up and maintain a petty cash fund, you must fund it with monies from your business. The simplest way to do this is to write a check to petty cash using your business checking account. With careful accounting, maintaining a petty cash fund will help simplify business transactions.
Place the current date on the date line of the check. Write “Petty Cash” on the “Pay to the Order Of” line of the check. Add the amount of the check in the dollar box. Many businesses maintain $100 in a petty cash fund. Write out the dollar amount in words on the appropriate line of the check. Sign the check with your signature.
Record the check in the check register for the checking account. Write “Petty Cash” and the dollar amount in the register and subtract the dollar amount from the balance of your business checking account.
Present the check at your bank and receive the correct amount of cash. Request the cash in the bill and coin denominations you desire to make it easy to make purchases with the petty cash.
Place the petty cash into the box and create an accounting journal to record petty cash transactions. Write the current date, "DR" (Debit) and "Petty Cash" at the top. Write the amount of the check you wrote for petty cash after this entry. Write "CR" (Credit) and "Petty Cash" next and write the same amount as the amount of cash you placed into the petty cash box.
Give one person the key and the responsibility for using the cash and accounting for it.
Record the times you use petty cash on the journal. Include a description of the expenditure, the date and the amount of cash you used from the petty cash box. Place receipts to verify the expenditures into the petty cash box.
Add up the expenditures on the journal as you use the petty cash. The total of the expenditures and the amount of cash in the petty cash box should equal the total amount of cash you placed in the cash box.
Replenish the petty cash when you use almost all of it. Write another check to "Petty Cash" for the total amount of the expenditures. This will bring the petty cash total back up to the original total again.
Record the amount of cash you place into the cash box to replace the petty cash on the journal as a credit and add the date.