Question

Two ways a business maintains control over petty cash funds

Answer 1

There are many ways a business can maintain control over petty cash. The two ways of maintaining control over petty cash are:

1. Establishing a system for petty cash.

2. Once the system is setup we have to manage the same.

I will ellabroate on each point.

1. Establishing a system for petty cash : a system should be established for maintaining petty cash. Accounting must be regularly done for the same. There must be a petty cash box which is to be locled. A person must be given the incharge to maintain a petty cash box. Every expenditure details is to be maintained by the petty cashier. There must be withdrawal limit to be set up. Deposit cash into petty cash. There must be maximum limit of petty cash.

2. Managing the placed system: the petty cashier has to plan the expediture and determine the amount needed. If there is high deviation in budget we have to determine the reason for the same. The petty cash balance should not be used for large payments as it will restrict day to day expenses. All the records kept by the cashier are to be checked. If have to also check whether the petty cas closing balance is matching with petty cash physical balance. It must be used for personal purposes.