Petty Cash

A petty cash fund is a small amount of cash kept on hand by your business for making small, routine purchases. It's typically used for incidental expenses, such as buying office supplies that are too small to be paid for by cheque or other forms of payment. 

The petty cash fund allows your business to make quick, small expenditures. The fund is usually managed by a finance officer who is responsible for keeping track of the transactions and balancing the petty cash.

Here are the steps to record petty cash in your business's accounting system:

1. Establish a petty cash fund: Set up a petty cash fund with a set amount of cash for small, daily expenses, such as office supplies or cab fares.
   
   

2. Document transactions: Keep track of all petty cash transactions by documenting the date, amount, and purpose of each expenditure. This can be done using a petty cash log or spreadsheet.
   
   

3. Reconcile the fund regularly: Regularly balance the petty cash fund by comparing the recorded transactions with the actual cash in the petty cash. This helps to ensure the accuracy of the petty cash records and prevent fraud or misappropriation of funds.
   
   

4. Transfer expenditures to the general ledger (your spreadsheet): Transfer the petty cash expenditures to the general ledger, this is the main record-keeping system for your business's financial transactions.
   
   

5. Allocate expenditures: Sort the petty cash expenditures into the appropriate expense categories, such as office supplies or travel expenses, for accurate financial reporting.
   
   

By recording petty cash transactions, your business can ensure accuracy in its financial reporting, meet legal requirements for financial reporting, and provide information for tax purposes. 

It's important to keep detailed records of all petty cash transactions, to maintain transparency and ensure the integrity of your business's financial information.

Here are the steps to check for a petty cash difference:

1. Compare records: Compare the petty cash log or spreadsheet with the actual cash in the petty cash. Ensure that all transactions recorded in the log or spreadsheet are reflected in the actual cash balance.
   
   

2. Investigate discrepancies: If there are any discrepancies between the recorded transactions and the actual cash balance, investigate the cause of the difference/discrepancy. This may involve reviewing receipts, invoices, or other documentation related to the petty cash transactions.
   
   

3. Re-count the cash: Recount the cash to ensure that the correct amount is on hand.

4. Make necessary adjustments: Make any necessary adjustments to the petty cash log or spreadsheet to reflect the accurate balance.

5. Document the reconciliation: Document the reconciliation process, including the date of the reconciliation, the starting and ending cash balance, and any discrepancies found and resolved.
   
   

By doing regular petty cash reconciliations and investigating any discrepancies, your business can ensure the accuracy of its financial records, detect any potential fraud or mismanagement, and maintain a transparent and effective system for petty cash management.