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Some departments are allowed to hold petty cash, say for example the Dispatch Section. It may require frequent purchase of postal stamps....every time it is practically difficult to debit postage instead the monthly total figure is debited at the end of the month after consolidation. At the opening of the month...a fixed sum in the form of petty cash is allotted to the dispatch section by way of petty cash and in between the amount allotted is fully spent on the purpose again the same figure is recouped for the purpose to meet the day to day postal expenses--it is the replenishment of petty cash for that section--and may have to be replenished3 to4 times a month.....At the end of the month The total advance shall be reversed by debiting the postage and the balance if any shall be carried over to next month with additional replenishment so that at any point of time the accumulated postage + balance of stamps + balance of cash left with the section will be equal amount advanced for that particular section for the month.
The system followed may slightly differ from organization to organization but core concept is one and the same. Some allot it in whole or in some it may be by part-part---For Eg. if the postage for the month comes average4000 per month----at the beginning of the month the amount allowed to petty cash may the full4000 or it could be1000+1000+1000+1000 basis...that depend upon the control requirements decided within the organization.
When the petty cash gets spent and holder the fund wants more cash, S/he is required to submit the expense statement along with bills. On the submission of the expenses and their subsequent approval, the amount is paid to the petty cash fund holder. This activity is called replenish the petty cash fund.
