The use of petty cash to make purchases is an exception to the university’s standard procurement methods. CU Marketplace or the procurement card are preferred methods to make small dollar purchases. Alternately, departments can identify frequently used vendors and consider setting up standing purchase orders through the PSC.

• When the fund is replenished, the credit to Cash is for the difference between the established amount and the actual cash in the fund.
• Wherever possible, units should use other disbursement methods (i.e., ePayment, GEMS, BuySite, etc.) instead of petty cash.
• Non-compliance with these procedures will result in immediate dissolution of the fund.
• Between $100 and $200 is fairly common, though you can go lower or higher, depending on your business.
• The following rules are observed in using a departmental petty cash fund.

The original is filed in General or Grants and Contracts Accounting and a photocopy is made available for the fund custodian. It is important that the supervisor reconcile the petty cash fund at the point it is received from the old custodian, because the supervisor is then responsible for it. The supervisor should reconcile it again when it is turned over to the new fund custodian. An Imprest Petty Cash and Change Fund Agreement will be promptly provided by General or Grants and Contracts Accounting to be completed by the new custodian. Companies replenish the petty cash fund at the end of the accounting period, or sooner if it becomes low.

Petty Cash: Accounting & Beyond

The fund custodian is responsible for completing a Petty Cash Reconciliation form quarterly verifying the imprest cash amount, and to confirm the name and address of the fund custodian. The reconciliation must be independently verified by the fund custodian’s supervisor in addition to the custodian’s verification. General and Grants and Contracts Accounting What should Petty Cash funds be used for? will maintain a database to monitor the consistent use of the fund. If there is no use of the fund during a six month period a letter will be generated to the fund custodian requesting that the account be closed. Annually, General and Grants and Contracts Accounting will send a list of open petty cash funds to the school fiscal officer.

When you or employees pay with petty cash, retain the receipt and attach the petty cash slip to the receipt for your records. Once you begin creating the petty cash float, your petty cash account book entry will show a debit of the amount deducted to your petty cash fund. At the same time, it will show a credit of that same amount to your bank account. Most petty cash funds are established by estimating the amount of money spent on small-value items during a given month.

Petty Cash Transactions

Additional requirements apply for petty cash funds for research study participants. When the original purpose for a petty cash/change fund ceases to exist, the fund should be closed immediately by the fund custodian. The fund custodian may close a fund by personally presenting the total fund amount to the UAB accountant responsible for imprest cash or to the Director of General or Grants and Contracts Accounting. Cash and personal check(s) resulting from the final reimbursement(s) are accepted. (All outstanding UAB petty cash vouchers must be reimbursed before closing the fund.) The UAB accountant will deposit the cash and/or check into the applicable Oracle account and close the fund. General or Grants and Contracts Accounting will also complete a Termination of Imprest Cash Fund form.

Funding might range anywhere from $50 to $500, depending on the size or nature of the business. It can be increased if business practices dictate that a higher value of cash on hand is required. The use of a petty cash fund can circumvent certain internal controls.

– 001 Petty Cash Funds

The custodian is responsible for appropriately documenting all purchases of a Petty Cash Fund. Departments must track purchases to ensure they are appropriate and have sufficient documentation to support Petty Cash Fund purchases. The cash should be kept in a locked drawer or cabinet with the key in the custodian’s possession.

This type of fund has neither income nor expense, so the cash balance remains constant. With the exception of the University Cashier’s Office and Hospital Cashier’s Office, the cashing of checks is not permitted from a change fund. The change fund custodian is simply authorized to exchange currency in order to acquire desired denominations of monies. The purpose of a petty cash fund is to provide an immediate cash resource to reimburse any out-of-pocket purchase not exceeding $499.99 for any one item or vendor receipt incurred by a department. Petty cash can be used only for the purchase of materials for the department.

Custodian Responsibilities

The fund custodian is assigned a vendor number so that petty cash reimbursements do not commingle with payments to the individual. Original UAB Petty Cash Vouchers, invoices, and other applicable documents, should be scanned into WebIT. The custodian’s UAB extension should be listed in the special instructions box for the check to be picked up. The Master File number assigned to the fund should be referenced on the request. After appropriate departmental approvals are made, the request then flows to the UAB accountant responsible for the Oracle Petty Cash reimbursement account number charged.

Violations of petty cash policy may result in non-reimbursement or fund closure. In all cases, the amount of the purchase using petty cash would be considered to not be material in nature. Recall that materiality means that the dollar amount in question would have a significant impact in financial results or influence investor decisions. Sometimes, the balance in your petty cash fund becomes too low to purchase small expenses.

Record expenses in the general ledger

Before establishing a petty cash fund at your small business, be prepared to create a petty cash accounting system. Accounting Services is responsible for final approval and creation of the petty cash account in FAS. Once approved, Accounting Services will request a check payable to the custodian at the address provided on the form (in person check pick-up is no longer allowed).

Learn the accounting basics you need to understand your finances and run your business with confidence. “Petty cash” and “cash on hand” sound a lot alike, and they do overlap. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance.