What Is the Purpose of a Voucher System With a Petty Cash Fund?
Uncover the essential practices that safeguard company resources and streamline the accounting of everyday operational costs.
A petty cash fund provides a small amount of readily available cash for minor, day-to-day business expenses. Companies often use a voucher system in conjunction with this fund.
Understanding Petty Cash
Petty cash is a small, designated amount of money a business keeps on hand for immediate, low-value expenditures. This fund addresses situations where issuing a check or processing an electronic payment is impractical or too time-consuming. Common uses include purchasing small office supplies, paying for postage, covering minor travel incidentals, or reimbursing employees for small, approved out-of-pocket expenses. Businesses maintain these funds to ensure operational efficiency for expenses typically ranging from a few dollars up to perhaps fifty dollars per transaction. Processing every small expense through a full accounts payable cycle would be inefficient and costly.
What is a Petty Cash Voucher?
A petty cash voucher is a pre-numbered form used to document each disbursement from the petty cash fund. This record includes the date of the expenditure, the amount disbursed, and a detailed description of the purpose of the expense. The voucher also identifies the payee and requires the signature of the person receiving the cash, alongside the signature of an authorized individual approving the disbursement. This document serves as both a request for funds and a receipt for the cash from the fund.
Why Use a Voucher System with Petty Cash?
Implementing a voucher system with petty cash establishes clear accountability. Each voucher provides a documented record of who received money, when, and for what purpose. This process helps ensure that funds are used only for legitimate business expenses, minimizing the risk of unauthorized spending or misuse.
The system acts as an internal control mechanism, preventing fraud and errors. By requiring proper documentation and authorization for each transaction, it creates a transparent trail of all petty cash movements. Without this system, it would be difficult to track cash disbursements, making the fund vulnerable to theft or unrecorded expenditures.
Vouchers are also instrumental for accurate record-keeping and proper expense classification. The details recorded on each voucher allow businesses to categorize expenditures correctly for financial reporting and tax purposes. This documentation is crucial for demonstrating the deductibility of business expenses, as the Internal Revenue Service (IRS) requires adequate records to support deductions claimed on tax returns.
Furthermore, a voucher system creates a robust audit trail. Auditors can review these sequentially numbered vouchers to verify that all petty cash transactions are properly authorized, recorded, and in compliance with company policies and accounting principles. This detailed trail simplifies the reconciliation process when replenishing the petty cash fund. The total of all signed vouchers should equal the amount needed to bring the fund back to its original balance.