Whether you are moving up in a business you have worked for or wanting to begin your own business, the basic knowledge of accounting is necessary to your success. You may not be able to keep things straight at first, but even if the vocabulary and the mathematics do not come easy to you at first, you will get the hang of it with time and practice.

In your scans of financial articles and tips on how to run your business you may have come across many terms that do not make sense to you. One such term may be petty cash. For many business owners, the phrase “petty cash” may seem to be an oxymoron. After all, petty means “insignificant” and to any struggling entrepreneur, no cash is insignificant.

What is Petty Cash Anyway?

Petty cash is basically an amount of cash in bills and coinage that is used to pay small expenses. These include things like stamps or other minor supplies that can be paid for more efficiently with actual dollars than with plastic. But petty cash is not just a clump of one dollar bills lying around the office. There should be a petty cash fund, or a petty cash account that is kept track of and watched over just as any other account would be.

How does the Account Work?

A petty cash account can be handled in an infinite number of ways, however, most financial advisors suggest that the petty cash account should begin with a verifiable amount of mixed bills. Typically, most businesses will assign a person the responsibility of keeping track of all petty cash business. Often a small ledger is used to monitor small sums of money, along with associated receipts. Once a petty cash fund is depleted, a complete reconciliation of receipts and ledger tabulations often takes place, making sure there is no money leaking out through the petty cash fund. Once the account is rectified, the fund can then be replenished

Conclusion

While petty cash may comprise the smallest account within a business setting, be it small or large, it is one area that is quickly able to develop leaks. Trustful employees should be given charge over the account and there should be a paper trail tracing all expenses.