Define The Purpose And Use Of A Petty Cash Fund, And Prepare Petty Cash Journal Entries

Funds are not to be taken home or stored at a private residence or in a motor vehicle. Funds, even grouped funds, over $1,000 must be stored in a fireproof safe in an alarmed room. Contact Public Safety, Investigations Division, for further questions regarding security. A request to establish a petty cash fund and its amount will be reviewed for need and will be granted or denied by the Director of Financial Accounting. Denied requests may be appealed to the Office of the Treasurer.

One asset is increasing, while another asset is decreasing by the same account. Since the petty cash account is an imprest account, this balance will never change and will remain on the balance sheet at $75, unless management elects to change the petty cash balance. Protection of Petty Cash – Access to cash funds must be restricted to the Custodian only. To prevent access by anyone except the Custodian, petty cash must be kept in a locked strong box in a locked desk or cabinet whenever not in use or whenever the Custodian is absent. In case of theft the campus security police and USNH Internal Audit must be notified. Loss of petty cash funds will be charged to the responsible Banner account as listed on the Cash Fund Request form. Petty cash funds must never be commingled with other USNH cash funds, personal funds, miscellaneous cash receipts, or collected revenue of any type.

• Funds are inactive if there has been no activity within a twelve month period and are subject to closure by Accounting Services.
• Does not permit access to the cash in the fund by anyone for any reason, under any circumstances.
• Petty cash expenditures are subject to all USNH and campus policies, procedures and practices relative to proper expenses, authorization, accounting and documentation.
• Requests to establish a change fund and its amount will be reviewed for need and will be granted or denied by the Director of Financial Accounting.
• If a shortage exists, a Payment Order will be prepared charging the departmental budget for the shortage.
• See Procedure 4-004, Preparation of Cash Fund Request, for detailed instructions and requirements.

Enter total reimbursement requested and accounting code information on a Check Request form. At fiscal year end, the Change/Petty Cash Verification form is sent to each fund custodian by the Accounts Receivable Supervisor. This form must be completed and returned within 10 business days for year end reconciliation. To maintain internal controls, managers can use a petty cash receipt (Figure 8.5), which tracks the use of the cash and requires a signature from the manager. Payments have been made from the petty cash fund without an original receipt. It is recommended that a petty cash fund be surrendered if it will not be used for thirty days or more, such as a closed dining facility or closed academic office for the summer. The custodian is responsible for completing a Petty Cash Receipt for every transaction and ensuring the receipt is signed by the recipient of the petty cash disbursement.

C Number Of Petty Cash Funds Per Department

See Procedure 4-002, Imprest Checking Accounts, for further details. In some cases, the petty cash Custodian may find it necessary to advance up to $200 cash to an employee for non-overnight travel or for miscellaneous business supplies. Contact Accounts Payable immediately if advances are not resolved fully within 4 days. The employee submits the petty cash voucher with the proper receipt to the Budget Unit Head for the signature and date. When there is a shortage of cash, we record the shortage as a “debit” and this has the same effect as an expense. If we have an overage of cash, we record the overage as a credit, and this has the same impact as if we are recording revenue. If there were cash overage, the petty cash account would be debited and the cash over and short account would be credited.

At the time of the audit, the petty cash custodian must provide a full accounting of the fund. The money in the change fund has been commingled with personal funds, petty cash funds, and/or BGSU Foundation funds. The money in the petty cash fund has been commingled with personal funds, change funds, and/or BGSU Foundation funds. Petty Cash Funds are established for departmental use for incidental and emergency small-dollar purchases where the use of alternative means (e.g., Purchasing Card) is not feasible. Reimbursement for properly approved expenses may be obtained directly from this fund. With this solution, petty cash reconciliations follow an automated workflow that ensures proper review and approval of account data, and maintains appropriate segregation of duties. When discrepancies are identified in petty cash funds, the product automates the workflow for their review by accountants.

How To Set Up A Petty Cash Management System

The temporary Custodian signs a copy of the reconciliation as a receipt. This receipt is retained by the regular Custodian since that individual is transferring personal responsibility for the value of the fund.

Receipts of cash or checks by the department may not be commingled with petty cash funds; all receipts are to be deposited in tact with the campus Cashier/Bursar within two business days. Units receiving petty cash funds designate one employee as custodian of the fund.

University petty cash funds are prohibited by the Ohio Revised Code from being used for making loans of any type. Petty cash funds are also not to be used for the cashing of personal checks or for reimbursement of travel or entertainment expenses. The cash should be kept in a locked drawer or cabinet with the key in the custodian’s possession. The custodian should be the only person with physical access to funds. Petty cash should be maintained on an imprest basis, which means that the amount of the petty cash fund should remain constant. The amount of currency and coin plus the petty cash receipts in the fund should equal the authorized amount of the fund.

Administrative Accounting Policies And Procedures

Petty Cash Fund Definition – A small cash fund used to make incidental purchases where normal purchasing methods are not practical. Special care must be taken to protect such funds from theft or misuse. Reimbursement for petty cash must be for the exact amount of the expense. Splitting one transaction in excess of $100 into several parts, or requesting reimbursement of less than the full amount of the expense is specifically not allowed. When fraudulent activity is identified, BlackLine Task Management automates workflow tasks to ensure proper internal controls are enacted to prevent any future fraud from occurring. All cash operations are subject to review by the Controller’s Office and the University’s internal and external auditors. Is personally liable for cash losses and discrepancies in the fund.

The Account Closure Form, a copy of the Maroon Credit Union Receipt and Report of Money Received should be sent to Accounting Services atcash- General Purpose of Petty Cash Funds – Petty Cash is intended for small, incidental purchases. The amount of the fund should not exceed the amount of expenditures required in a 45 day period. This policy should be read in conjunction with the following related policies and procedures. Additional information (i.e., procedures and forms) related to Petty Cash may be found in the Petty Cash Administration section on Fingate. Expenses should also be fully documented and policies followed to ensure that the expenses are in line with the company’s objectives.

A request to establish a change fund account is accomplished by completing a University Cash Fund Application Form . The completed Application is submitted by the budget administrator to the Business Office. Inquiries and assistance pertaining to procedures involving petty cash accounts can be obtained from the Manager of the Business Office.

Accounting Principles I

Whenever someone in the company requests petty cash, the petty cash custodian prepares a voucher that identifies the date, amount, recipient, and reason for the cash disbursement. For control purposes, vouchers are sequentially prenumbered and signed by both the person requesting the cash and the custodian. After the cash is spent, receipts or other relevant documents should be returned to the petty cash custodian, who attaches them to the voucher. All vouchers are kept with the petty cash fund until the fund is replenished, so the total amount of the vouchers and the remaining cash in the fund should always equal the amount assigned to the fund. Companies assign responsibility for the petty cash fund to a person called the petty cash custodian or petty cashier. To establish a petty cash fund, someone must write a check to the petty cash custodian, who cashes the check and keeps the money in a locked file or cash box. The journal entry to record the creation of a petty cash fund appears below.

Information related to the security of funds should be directed to Public Safety, Investigations Division. The funds are secured and not deposited in a separate bank account.

Fund The Account

A written request with the details of the business needs must be submitted to and approved by the Office of the Treasurer. Integrated storage allows all records to be easily linked directly to the transaction details. This also makes it easy for internal auditors to review petty cash records. When a case of fraudulent use of funds is identified, the software automates the workflow process to enact additional internal controls. Such controls are necessary to prevent any further fraud from occurring. Having cash in a lock box creates a unique set of challenges, which demands an effective cash management system. In addition to a log, your company’s policies should include a requirement for receipts to be provided for every purchase.

At the end of July, in the petty cash box there should be a receipt for the postage stamp purchase, a receipt for the milk, a receipt for the window cleaner, and the remaining cash. The employee in charge of the petty cash box should sign each receipt when the purchase is made. The total amount of purchases from the receipts ($45), plus the remaining cash in the box should total $75. As the receipts are reviewed, the box must be replenished for what was spent during the month.

Change Guidelines

Having such a system in place serves as an internal control to protect the business against theft and fraud, and it supports the larger, general ledger reconciliation process. The custodian maintains the petty cash fund in a constant state of reconciliation; therefore, the total cash on hand plus the total receipts should equal the original amount of the petty cash fund. The Petty Cash and Change Fund Reconciliation must be completed quarterly and submitted to the Internal Auditor. If the fund does not balance, the Cashier’s Office should be contacted for assistance.

• There may be a petty cash fund in each major department of a company, so that local cash needs can be more readily met.
• Notice that the petty cash account is debited or credited only when the fund is established or when the size of the fund is increased or decreased, not when the fund is replenished.
• Internal controls are also designed to protect employees from inappropriate charges of mishandling funds by defining his/her responsibilities in the handling process.
• Upon review of the box, the balance is counted in the following way.
• Regular tallies of the funds, verification of receipts and vouchers, and reconciliation of expenditures will ensure compliance with company policies and minimize discrepancies in the balance sheet.
• If the petty cash account often needs to be replenished before the end of the accounting period, management may decide to increase the cash balance in the account.

The journal entry to establish the petty cash fund would be as follows. Since the University is tax-exempt, petty cash accounts may not reimburse for any taxes paid. Any taxes paid by an individual become the personal responsibility of the purchaser. Should an inappropriate payment of taxes be made from a petty cash fund, the custodian is personally liable for replenishing the fund for the improper reimbursement. A petty cash fund is a small amount of bills and coins that an organization keeps on the premises to pay for minor expenditures.

The petty cash fund must be physically counted and reconciled before it is accepted by the new Custodian. If the vouchers total $130 but the fund needs only $125, the journal entry includes a $5 credit to the cash over and short account. The cashier has the employee sign and date the petty cash voucher to indicate that the employee received the money. The employee receives permission from the Budget Unit Head to make a cash purchase from personal funds. Inquiries and assistance pertaining to procedures involving change funds can be obtained from the Manager of the Business Office. The money in the petty cash fund has been commingled with revenue collected by the department that should have been deposited with the Bursar’s Office. The petty cash fund has not been properly registered with the Business Office.

How Do You Improve Petty Cash Management?

Consider the journal entry below, which is made after the custodian requests $130 to replenish the petty cash fund and submits vouchers that fall into one of three categories. Typically, petty cash accounts are reimbursed at a fixed time period. Many small businesses will do this monthly, which ensures that the expenses are recognized within the proper accounting period. In the event that all of the cash in the account is used before the end of the established time period, it can be replenished in the same way at any time more cash is needed.

A change fund is established to make change at sales locations. These funds are not to be used for the payment of small and/or non recurring charges. The Office of the Treasurer may conduct on-site audits of selected department Petty Cash Funds, Petty Cash Checking Accounts and Change Funds each year. The funds will be selected randomly and the custodian for the selected fund will be notified and an appointment to conduct the audit must be made within 72 hours.

Handling Of Petty Cash Funds

Any further questions regarding security should be directed to Public Safety, Investigations Division. Neither petty cash nor change funds are to be created or replenished from departmental cash collections of any variety. Designate a petty cash fund custodian.Prior to requesting a petty cash account, the unit should identify an individual who will be fiscally responsible for the custody and maintenance of the petty cash. The custodian must be a University of Chicago employee. The department head must appoint an individual to be custodian of the department’s petty cash fund. Petty cash custodians must be salaried employees of the University, and may not be undergraduate students, graduate students or temporary personnel. Custodians are required to complete Petty Cash Training.

• Information related to the security of funds should be directed to Public Safety, Investigations Division.
• See Procedure 4-005, Preparation of Petty Cash Voucher, for detailed instructions and requirements.
• Click here for further information on departmental deposits.
• Wherever possible, units should use other disbursement methods (i.e., ePayment, GEMS, BuySite, etc.) instead of petty cash.
• The transaction that replenishes the petty cash fund is recorded with a compound entry that debits all relevant asset or expense accounts and credits cash.
• Shortages are personally repaid by the custodian subject to the same provision.

In addition, payees will receive payment faster and employees may no longer walk to the campus Cashier/Bursar for reimbursement. For these reasons, departments are encouraged to establish petty cash funds where there is demonstrated need.

Upon receipt of the reimbursement check, a Report of Money Received Form should be completed identifying that the cash will be deposited in the FAS Petty Cash account. Departmental deposits are processed by the Maroon Financial Credit Union. Click here for further information on departmental deposits. All petty cash reimbursements should be submitted via ePayment. Petty cash should be replenished at least annually, but it is recommended to replenish quarterly . Funds are inactive if there has been no activity within a twelve month period and are subject to closure by Accounting Services.