What is petty cash?
Petty cash, also known as a cash float, is a small amount of cash that is kept on hand by a business for the purpose of paying for small, unexpected expenses. Petty cash is typically kept in a locked box or drawer and is only accessed by one person, who is responsible for maintaining it. The amount of money in the petty cash fund will vary depending on the needs of the business, but it is typically between $50 and $200.
The history of petty cash
The origins of petty cash are unclear, but it is thought to have originated in ancient China, where merchants would keep a small amount of cash on hand to pay for unexpected expenses. The term petty cash first appeared in print in the early 1800s, and by the mid-19th century, petty cash was a common feature of businesses in the United States.
How is petty cash used?
Petty cash is typically used for small, unexpected expenses that cannot be paid for with a check or credit card. Common examples include office supplies, parking meters, and small repairs. Petty cash is also sometimes used to make change for customers.
Advantages and disadvantages of petty cash
Petty cash has a number of advantages over other methods of payment, such as checks and credit cards. Petty cash is immediate, so there is no need to wait for a check to clear or for a credit card payment to process. Petty cash is also convenient, as it can be used to pay for small expenses without having to go to the bank. However, there are also some disadvantages to using petty cash. For example, if the petty cash fund is not properly managed, it can quickly become depleted. Additionally, if petty cash is stolen, it can be difficult to recover the funds.
How to set up a petty cash system
If you decide to set up a petty cash system for your business, there are a few things you will need to do. First, you will need to choose a responsible person to manage the petty cash fund. This person will be responsible for keeping track of all expenses and replenishing the fund when necessary. Second, you will need to set up a petty cash box or drawer. This should be kept in a safe place, such as a locked desk or cabinet. Finally, you will need to establish petty cash procedures, such as how much money can be spent per day and what type of receipts are required. Once you have all of these things in place, you will be ready to start using petty cash.
Petty cash best practices
There are a few best practices that you should follow when using petty cash. First, always keep track of all expenses. This will help you stay organized and ensure that the petty cash fund is being used properly. Second, replenish the fund regularly. This will help you avoid running out of money and having to dip into other funds. Finally, be sure to choose a responsible person to manage the petty cash fund. This person should be trustworthy and have a good understanding of accounting principles.
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