Petty cash is used for making of small payments such as postal courier charges, staff welfare expenses, employee reimburse expenses rather than writing checks. Petty cash is also referred as a petty cash fund.
Petty cash could be a part of cash account and it is a current asset, you can also utilize petty cash for material transportation charges purpose.
Petty cash fund can maintain by petty cash custodian, when petty cash fund showing low balance, then responsible person should take the approval with necessary supported documents, how petty cash has been spent, the same has to submit to the manager to take the additional petty cash amount.
Example, petty cash has been allotted for the month of April 2016 is 100$, in case if cash custodian has spent $100 in less than a month, then he needs to request his manager for extra petty cash for the remaining days during a month.
Generally petty cash voucher can use for making of small payments from petty cash fund. Petty cash voucher is useful as a supporting document for auditing purpose.
Petty cash accounting entries
Initial petty cash account could be a debit when the petty cash received from cash account and give the credit to the cash account.
Petty cash A/c – Debit
Cash A/c — Credit
The petty cash disbursement from the cash keeper for making of small payments like, below.