PETTY CASH REFUND: WHAT IT IS, DOCUMENTS AND EXAMPLES - DUDAS - 2025

The reimbursement of petty cash is the reimbursement that is made to a fixed fund assigned to a department of the company, for the amount of the payments made by this means, according to what is indicated in the invoices and receipts presented, in order to complete the your starting amount in cash again.

Businesses generally keep smaller amounts of cash at their facilities to meet small miscellaneous payments, such as food and office supplies.

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There may be multiple petty cash locations in a larger business, probably one per building or even one per department. A separate accounting system is used to track petty cash transactions.

Such payments are generally handled through a small cash advance system, for which an amount of “fluctuating money” is assigned. This is the maximum amount of cash that can be held at any one time.

The preferred method of making a refund is by check, requested through a duly authorized and documented check request.

What is the petty cash refund?

To establish a petty cash fund, a check is created for the amount of the fund allocated to the particular petty cash.

The initial entry of the petty cash journal is a debit to the petty cash account and a credit to the cash or bank account.

The depositary then disburses different amounts from the petty cash fund in exchange for receipts related to whatever the expenses are.

At this point there is no journal entry. Instead, the cash balance in the petty cash fund decreases while the number of receipts increases.

The remaining cash plus the total receipts must at all times be equal to the initial amount of funds in the lower box. However, theft or registration errors can result in a variation of the initial financing amount.

Refund

When the cash balance in the petty cash fund drops to a low enough level, the petty cash custodian requests the cashier for cash reimbursement.

This acquires the figure of a total of the receipts that have been accumulating. The cashier writes a new check for the full value of the receipts and exchanges this check for the receipts.

The petty cash journal entry is a debit to the petty cash account and a credit to the cash or bank account.

The petty cash custodian enters the cash into the petty cash drawer, which should now contain the original amount of money allocated for the fund.

The cashier creates a journal entry to record petty cash receipts. This is a credit to the petty cash account, and debiting several different expense accounts, depending on what was purchased with the cash.

Controls

Strong internal controls need to be established for cash receipts or disbursements to prevent mismanagement of funds and safeguard against losses.

- The smaller box must be kept in a safe place. For example, in a cash box.

- The cashier must be responsible for maintaining the invoices corresponding to payments made through petty cash.

- Surprise cash counts should be performed from time to time to ensure the accuracy of the cash balance indicated on the petty cash register.

- The amount of cash in the petty cash should not be too high.

Documents

Each company defines the formats to be used and the procedure to follow for the reimbursement request, but essentially the process consists of bringing together all the payments made with the bottom of the lower box and the respective supports.

It is important that every payment, even minimal, be supported by the respective invoice or, if applicable, the equivalent document, where the company or person to whom the payment was made can be clearly identified, for pertinent issues such as handling of taxes and accounting.

Refund format

The custodian responsible for handling the petty cash must fill out a voucher called "Refund of petty cash", which lists the expenses incurred in a given period, in order to receive reimbursement for the money consumed.

The employee must submit all original expense receipts attached to a completed petty cash reimbursement form:

The sum total of all invoices and receipts in the reimbursement format and the remaining available cash in the petty cash must equal the amount of the original advance fund.

The totalized petty cash refund format, with the sum of all individual payments, is sent to the controller for final review and authorization.

Disbursement voucher

To reimburse the value of the expenses perpetrated according to the receipts and petty cash invoices, which are listed in the document "petty cash reimbursement", a proof of payment or expenditure is generated, as shown below.

All of these involved documents should be attached to the journal voucher accounting record.

The refund form and originals of all documentation are sent to the accounts payable department for processing.

The proof of discharge is made in the name of the custodian of the petty cash, so that the check can be issued in his name for the amount requested. The refund check can be cashed privately by the custodian.

Examples

Company ABC decides to allocate $ 100 in cash as minor cash fund to its operations department, so that it can directly process its low-cost expenses.

Therefore, on March 1 the money of $ 100 is delivered. The initial allocation of petty cash will be recorded in the accounting as follows:

During the month of March, the operations department made the following minor payments through the petty cash:

- January 3: purchase of tea for $ 10.

- January 15: purchase of stationery for $ 50.

- January 27: payment to the plumber for $ 20.

These payments made with the petty cash will be recorded in the accounting as follows:

The petty cash must be repaid on March 31st. As the total expense for the month was $ 80, so this will be the amount to be reimbursed:

Therefore, as of April 1, the lower box will once again have the $ 100 that was initially assigned to it.

References

1. Fordham University (2019). Petty Cash Imprest Funds and Reimbursements. Taken from: fordham.edu.
2. Stanford University (2019). How To: Reimburse an Employee with Petty Cash. Taken from: web.stanford.edu.
3. Accounting Simplified (2019). Accounting for Petty Cash. Taken from: accounting-simplified.com.
4. Steven Bragg (2019). Petty cash accounting. Accounting Tools. Taken from: accountingtools.com.
5. Gerencie (2017). Petty Cash Refund. Taken from: gerencie.com.