Petty cash is the money used to cover small expenses. It is very useful, and can be a deductible business expense. It is important to keep track of business expenses, because in a petty cash, even a penny accounts. Furthermore, it is necessary to find out if someone is inappropriately putting his hand into the dough.
1. Scores the opening balance. This can be done simply in a spreadsheet that you keep in the safe with petty cash or a bank statement. It is essential to have the balance of the last reconciliation to compare the recent expenses.
2. Count the cash you have in the safe, which may include some loose change. If it is equal to the opening balance, the work is done and it does not make a reconciliation.
3. Sum up the total of the receipts. Every time someone uses petty cash for business expenses, it is essential to attach a receipt and leave it in the safe.
4. Make the total of uncashed checks and promissory notes or IOU with receipts. Some employees may be authorized to use petty cash to cover personal expenses, provided that money back. In such cases, the employee must add a record IOU (instead of a receipt) to the safe when withdrawing cash and then must return the same amount of cash or write a check for the amount.
5. Add the amount of cash from the safe and compare it with the receipt total and the total amount of checks and notes receivable. This sum must be equal to the opening balance at step 1.
6. Report if there is any missing. If the sum of steps 2, 3 and 4 is not equal to the initial balance, it means someone has withdrawn money from petty cash without leaving you note or without attaching a receipt for business expenses in the safe. Use the appropriate means in accordance with the standards of your office to report that money missing from the petty cash.