If petty cash is short at month-end, count and reconcile the float before posting a balancing expense. The difference may come from a missing receipt, an unrecorded advance, a timing error or an actual loss. Record the facts and obtain approval for any correction without treating an unexplained amount as automatically deductible or automatically the custodian’s debt.
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Count at a clear cut-off
Agree the count time, identify who holds the cash and separate money belonging to other activities. Record notes and coins, valid vouchers, outstanding advances and replenishments in transit. Have an appropriate second person verify the count where practical.
Example: a $500 float does not reconcile
The authorised float is $500. Approved vouchers total $320, so the expected remaining cash is $180. The count finds $160, leaving $20 unexplained. Preserve that calculation and investigate the difference. Do not manufacture a receipt or increase an unrelated expense to force the balance to agree.
Trace common causes systematically
- A receipt recorded for the wrong amount.
- Cash issued as an advance but not logged.
- A replenishment counted in the wrong period.
- A purchase paid by card and also reimbursed in cash.
- Personal money mixed with the company float.
- A real loss requiring escalation.
Ask neutral questions and retain the custodian’s explanation. A shortage alone does not establish dishonesty.
Keep the accounting evidence
ACRA’s guidance on directors’ obligations includes keeping proper accounting records. For this reconciliation, retain the count sheet, vouchers, advance log, replenishment evidence and reviewed conclusion. The correction should explain what happened rather than merely make the cash account look tidy.
Approve the treatment before closing the month
Ask the accountant how to classify any established error or loss and what tax support is needed. If the facts remain unresolved, record that status clearly. Do not make an automatic deduction from an employee’s salary; employment-law requirements need separate review.
Strengthen the control without excessive paperwork
Keep one custodian, defined approval limits and a simple numbered voucher or expense log. Reconcile before replenishment and restrict access to the cash. Where repeated small losses continue, consider whether a controlled business payment method would provide a better record.
Is every shortage a business expense?
No. Determine the underlying cause and support the accounting and tax treatment.
Can we assume the person holding the cash must repay it?
No. Establish responsibility and the applicable legal position before demanding recovery or making payroll deductions.
Related guidance
reconciling bank and ledger balances; tracking balances held by payment processors; keeping payment timing separate from expense recognition.
Discuss your next step
Our accounting team can review petty-cash controls, reconcile unexplained balances and help maintain a clear month-end audit trail. Email [email protected] or WhatsApp +65 8501 7133. Legal advice, where needed, is provided by advisers from associated law firms.