Question

What are some of the controls that one should have when looking at a petty cash fund?

Answer 1

Controls that one should have when looking at a petty cash fund

1) The responsibility of handling thr petty cash fund should be entusted to an employee who should document all the expenses incurred and should be responsible for the safe custody of the fund.

2) A voucher should be prepared while incurring each expenditure and the voucher should be supported by documents such as invoice, bill, receipt,etc.The voucher should be countersigned by a Manager to whom the petty cash employee reports.

3) When cash is disbursed for meeting an expense, the voucher is to be signed by the cash receiving person.

4) The petty cash fund amount should be reasonable enough to meet the expenses for a reasonable period, say a

month.The fund should not be too small which will require frequent replenishment, nor too big compared to the expenses being incurred.

5) At the end of the day, the employee should verify the physical cash balance,enter the denominations and sign the same.

6) Surprise checks of the cash balance should be done by the Manager or by the Internal Audit department.

7) At the end of the Accounting year, petty cash balance should be verified by the Statutory auditor and should be certified by him.

8) Petty cash should be kept in safe custody under lock and key. Two keys should be operated to open the petty cash box, one to be kept by the manager and the other with the employee.