In order to keep track of all expenses related to your home-based or small business, it is necessary to keep track of the minor day-to-day expenses you pay in cash, as well as the expenses you pay by check or bank transfer. Minor cash expenses add up over time, and it will be important to know what they are in order to record them on your books, control them, and also to be able to deduct these expenses for income tax purposes. Rather than paying these expenses out of your personal funds, it may be more convenient to have a petty cash fund.
Types of Petty Cash Expenses
The use of debit and credit cards may be rapidly replacing and eliminating cash transactions, but there are still several types of minor expenses that are more convenient to pay by cash, or which you may prefer to pay by cash. These could include postage, office supplies, minor repairs, tips, gas for your vehicle, parking and tolls, and public transportation fares, among others.
Advantages of Using a Petty Cash Fund
The advantages of using a petty cash fund for business-related expenses include the following:
You can separate business expenses from personal expenses.
A petty cash procedure provides an easy way to record minor cash expenses on your business books.
You will have the receipts in order to take tax deductions for these minor expenses.
The petty cash procedure will allow you to keep documentation of these expenses together in one place.
By knowing where your cash is being spent, you will be in a better position to control it.