Introduction

Petty Cash Fund is defined as a small cash fund usually kept in a safe box, used to make minor
purchases where normal purchasing methods are not practical. Petty cash fund is part of a
business entity’s procurement or purchasing process. Controls must be taken to protect such
funds from theft or misuse. The petty cash are usually handled by the Cashier in charge or
assigned by the organization. Petty cash is reconciled by the cashier and the use up money is
been reimbursed to the cashier again. The petty cash associated expenses or cash expenditures
are controlled by ensuring that the nature of the expenditure is vindicated or significant. This
should also be planned and form part of a projected budget to ensure that cash depletion is kept
within the bounds of free and available funds. Furthermore, internal control policies require that
business expenditures are paid out by cheques issuances and preparation of cheque vouchers are
done by accounts payable team, to serve as audit trails.

It would be unrealistic to apply the same methods for multiple minor purchases or expenses due
to the frequency of their occurrences and the marginal amounts involved. Preeminent practices
recommend contribution to the imprest system, an approach that involves the setting aside of a
marginal cash fund for purposes of paying minor business expenditures.

Body

Lack or weakness in petty cash control actually opens up opportunities for accounting excesses
like unauthorized purchases, cash advances, cheque encashment and similar breaches that
neglecting procurement and accounting policies. Some of the polices which are to be followed
for the petty cash setting up.

1. The amount to be set up as the petty cash fund depending on the size of the organization
and how many minor expense does the company have to pay within a month’s time. Petty
cash is commonly based on the average amount of minor expenditures that generally
occurs within a four-week period. The amount could range from lowest and to maximum
of a $1000.00.

2. The maximum amount of payment by petty cash usually of $50.00 each per the voucher.

3. The internal control procedures for the cheques written and balance checks with
vouching.

4. The guidelines for the reimbursement of the petty cash funs back to the custodian.

5. The policy and procedures for the recoding of funds paid out and the reimbursements.

6. The custodian responsible for the safeguarding its physical security.

 7. Procedures for the documentation and the approving authorities

8. The polices that govern the types of expenses allowed to be reimbursed against the funds.

The Imprest System 

Imprest refers to a amount of money, usually identified as the petty cash fund (PCF) that is
assigned to a selected person who undertakes responsibility as fund custodian. The custodian is
responsible for the fund’s disbursements and subsequent reimbursements once it reaches near-
depletion.
The amount may not be insignificant, but there are certain petty cash procedures and guidelines
to detect as a means to ensure that the fund’s usage is properly controlled, monitored and
accounted for.

Reference

o GNU Free Documentation License / Wikimedia Commons

o By arya from San Luis Obispo, USA / Wikimedia Commons
o By KMJ at de.wikipedia / Wikimedia Commons
https://en.wikipedia.org/wiki/Petty_cash