The result should be the total of the disbursements. The next step is to count the cash in the petty cash box and subtract that amount from the float. Here, the float, or initial balance, is $500. They set up a petty cash fund of $500, which can be used to buy supplies, gas for company trucks, and snacks for the crew. Here are the basic steps of the reconciliation process:Īs an example, we’ll walk through the month-end reconciliation for ABC Plumbers. The basic idea is to reconcile the total disbursements with the amount of cash remaining in the fund, and to ensure that the disbursements all fall within the approved uses for the fund. How do you perform a petty cash reconciliation? If you’re just setting up your petty cash fund, you’ll want to read this post on how to manage that fund. Knowing how to reconcile petty cash is a crucial component of any petty cash management system. At many companies, the petty cash custodian - while obviously being trustworthy enough for the responsibility - is not an accountant or bookkeeper by training, and so that person may make mistakes. Part of the task is also ensuring that the records for disbursements are being kept correctly. This helps to make sure that the cash was used for legitimate, business-related expenses. Reconciling petty cash is a formal review of the purchases made with a company’s petty cash fund and comparing those purchases with the cash balance in the petty cash fund. The best way to do that is by performing regular petty cash reconciliations. But since cash is very easy to steal or misuse, keeping an eye on it is essential. It’s certainly much easier than filling out an expense report and waiting for the next billing cycle to get reimbursed, especially when it’s a small amount of money. Debit cards and smartphones are quickly becoming the favorite ways for the younger generations to pay for things, but even so, many small businesses find that maintaining a petty cash fund for small purchases still makes sense.
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