Since I work with a lot start-ups where many cash purchases are made by the owner, a petty cash account is necessary. A system for tracking, recording and reimbursing petty cash should be created in order for cash purchases to be recorded. Taxis, tips, food purchases, are often cash purchases that should be recorded in the account.
It is best to use a petty cash account to track expenses
as they happen, and code them by account name. For example, a taxi receipt for 10.00 should be recorded in the Petty Cash register. To reimburse these petty cash
expenditures, a transfer from the business checking account can be used to fund the account. The Petty Cash account is in
effect a liability until it is reimbursed, when it will return to a
A practical way to maintain petty cash is to collect the receipts and make entries into Quickbooks once a month and reimburse the account monthly. If your petty cash account has to be reimburse more than once a month, then you may need to increase the fund. Run a report in Quickbooks for prior month petty cash expenses to see if you need to increase it.It is not good to have too much money in petty cash either, since that cash could be used to fund other areas of the business. $200 is good for a business for a sole proprietor or business with 5 employees.
To control petty cash with employees, I suggest not keeping much cash in the cash box, but keeping receipts there. The owner of the business or the office manager should be the only people who have access to the cash box. If an employee needs to cash to make a purchase, then give them the cash, and make sure you get a receipt. Have them write what the purchase is for the day the purchase is made so you have to ask later.