How to Reconcile Your Petty Cash

by Greg DePersio

3 min read

Petty cash is part of a business’s financial records. Money held in the cash box is an asset. Purchases made with money drawn from petty cash are expenses. Developing an accurate and regular petty cash reconciliation process helps you catch errors early and gives you a head start at tax time.

Standardize Your Petty Cash Reconciliation Process

It may seem like a easy fix to write out a quick balance check on a random slip of paper, but it’s best to resist that temptation. Develop your own template or download an existing one to keep your petty cash reconciliation records clear and consistent. A basic form should include fields for the date, starting balance, expenses, credits, ending balance, and any discrepancies. You’ll appreciate the organization and clarity of your reconciliation records when it’s time to do your taxes or prepare a balance sheet.

How Often Should You Reconcile?

Cash box reconciliation is a simple job if you do it regularly. Have a look at the number of purchases made from your petty cash, and use this as a guideline for setting up your reconciliation schedule. If your petty cash is used infrequently for coffee, stamps, and random office supplies, you can reconcile monthly. If you have ongoing daily expenses, such as taxi fares, delivery expenses, and parking costs, you may find a weekly or bi-weekly reconciliation more manageable.

Refer to Your Previous Cash Box Reconciliation Records

Carry forward the ending balance from your previous reconciliation, and use it as your starting balance for your current reporting period. Each reconciliation flows through to the next providing you with a clear accounting of your petty cash spending at the end of the year.

Balance Your Petty Cash

Sort your receipts into date order, and record them on the petty cash reconciliation form. Purchase receipts go in the expense column. That total represents your petty cash expenses for the reporting period. Vouchers for petty cash top-ups and other additions to the cash box go in the credit column. Deduct your expenses and add your credits to the starting balance. The total is your ending balance; it should match your cash on hand.

How Much Cash Is in Your Cash Box?

If you use your petty cash to make change, you probably carry small bills and various rolls of coins. Count up everything. If the cash total matches the ending balance on your reconciliation form, the petty cash is balanced. If you have more cash or less cash, you have an overage or shortage that requires investigation.

Finish the Bookkeeping Part of Your Reconciliation

If you locate a missing receipt that accounts for a shortage, make corrections to your reconciliation. Move any unexplained overages or shortages to the over/short account in your general ledger. Code your receipts for posting to the appropriate accounts. This ensures that those small daily expenses for office supplies and postage costs are included in your tax-deductible totals. Attach the receipts to the reconciliation form, and file it away with the others. Top up your petty cash box with the same amount of money that was spent in the reconciliation reporting period. Don’t forget to put a top-up voucher in the cash box – you’ll need it for the next reconciliation. Regular petty cash reconciliation keeps your books in order while keeping you in touch with your spending. Staying on top of those incidental purchases helps to identify repeat errors, theft, and unnecessary purchases. That can only help your bottom line.

References & Resources

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