For petty cash disbursements, the process is slightly different.  There is still a requirement to obtain the appropriate documentation and approvals throughout the process.

1.Identify a need to purchase materials, supplies, or services (including documentation)

2.Disburse cash to the employee

3.Obtain receipt

Step 1: Identify a need to purchase materials, supplies, or services

This step of the process is similar to what we just discussed

An employee of the company fills out a petty cash voucher identifying what, when, how much to purchase of a good or a service

The petty cash voucher must be approved by the employee with authority to approve purchases

Petty cash voucher

Qs: How does it differ from a purchase requisition?

Less details

Qs: What is similar?

1.Approvals – all expenditures, no matter how small, need to be approved

Note: The secondary approval would only be required if the expenditure is above the custodian’s limit.

Step 2: Disburse cash to the employee

The petty cash custodian disburses the required amount of petty cash

The employee receiving the cash and the employee disbursing the cash sign a petty cash voucher. This document provides evidence that the amount was disbursed.

Step 3: Obtain receipt

Once the purchase has been made, the employee must deliver a receipt to the accounting department to support the transaction

A petty cash voucher is not an appropriate receipt

If there is any excess petty cash, it must be returned to the petty cash custodian

Qs: Why is it important that a receipt is always obtained?

1. The petty cash voucher is not enough evidence of the transaction. For tax and VAT purposes, you need an official receipt from the vendor. A petty cash voucher is not an official receipt.
2. What if the amount estimated differs from the actual amount spent? Need to get this cash back from the employee.

The petty cash voucher is important documentation for the approval and to track how much cash was given to who.