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Petty cash is a small amount used for incidental expenses below a certain amount, usually around $50 USD in the US. It can be used for office supplies, meals, entertainment, and transportation. Documentation is required to avoid audit issues. It is usually managed by a company official and requires accurate documentation.
Petty cash is a small amount used by a company’s employees for incidental expenses below a certain amount, usually around $50 USD in the United States. Many finance executives agree that, in certain cases, it is unprofitable – not to mention a waste of time – to write a check for small business expenses. Some common uses of cash include purchasing office supplies and paying for meals, entertainment, local transportation, and other miscellaneous fees. It can also be used to provide refunds or changes to customers. Regardless of its use, documentation is usually required to account for funds in order to avoid potential audit issues.
Sometimes called an imprest account, money from a petty cash fund can be used to reimburse employees for past business-related expenses or it can be set aside for prepayments. Funds can usually be used to change customers who also purchase goods or services from the company. In addition, cash on hand is often spent on stationery or lab supplies, but is generally not intended for the purchase of large items. Instead, it is usually spent on accessories such as paper and pens. In addition, many academic departments at universities that use human subjects in their studies reimburse courses using cash.
In general, most minor expenses incurred by an employee during the course of business are eligible for cash reimbursement, depending on specific employer policies. Employees of certain companies often pay for local travel, including buses, taxis or subways, for which they can be reimbursed. Office events, such as staff meetings or parties, can also be funded with small funds, as can certain business meals and other inexpensive entertainment.
There are certain limitations and exemptions related to the use of a petty cash fund. For example, use as a check cashing fund or salary advance source is not normally permitted. If the business is located in the US, there may also be certain sales tax exemptions depending on the state. In addition, the amount of money in a petty cash account may be increased or decreased as needed in accordance with the organization’s policies.
A company supervisory official is usually designated as the custodian of petty cash funds, and the maintenance of the fund requires accurate documentation for accounting purposes. For example, it’s generally a good idea for employees to use application forms and itemized receipts when handling small funds. These forms, also known as petty cash vouchers, are usually available at office supply stores.
Asset Smart.
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