How Do You Establish And Replenish A Petty Cash Fund?

By mayo 6, 2021diciembre 8th, 2021Bookkeeping

replenish petty cash entry

Double-entry accounting is the method used by professional accountants and bookkeepers to maintain business financial records. The basis of the double-entry system is the accounting equation. In this lesson, you will learn why financial accounting is important to managers and other decision makers. You will also understand the necessary components of financial accounting for managers. In this lesson, we are going to discuss sales of inventory. You will learn the types of sales made, the items that affect sales profit, and the way to record sales in the accounting records.

It’s best to put your petty cash policy in writing and provide some examples of appropriate expenses. You may also put a limit, such as $25, on all petty cash transactions.

To keep petty cash from disappearing, consider keeping it in a locked box that only you or an employee designated as the petty cash custodian or cashier has the key to. If there’s a shortage or overage, a journal line entry is recorded to an over/short account.

replenish petty cash entry

There is no entry to the Petty Cash account when merely replenishing the petty cash. Next, let’s assume that there is only $20.00 in cash remaining and Mary realizes that $20 is not sufficient. She needs to obtain a company check for $80 in order to cash it and return the cash amount to $100 .

Replenishment Of Petty Cash Fund

Petty cash can also work for frequent but mundane expenses, like milk for the office fridge, stamps, or cleaning supplies. Note here that to replenish the fund, $3.50 is required ($3.50 + $71.50). Complete this form to establish a new Petty Cash/Cash in Drawer fund or to increase or decrease the fund dollar amount. Approval for new accounts or increases in the amount must be obtained in advance from Accounting. Annually certifying with Accounting that the fund balance is equal to the account balance, that they are still the custodian, and that the fund is reconciled no less than monthly. All small amounts of cash funds should be locked in a box and kept in a secure place. This lesson explains what a purchase journal is, how it is used, and what types of transactions are recorded in a purchase journal.

You must document all of your petty cash expenses if you want to write them off on your taxes, just like you would any other income or expense. The next step is to write a check to petty cash for $200, cash it, and stow it in your cash register or lockbox. A monitoring and tracking system, with receipts, should be used for the petty cash fund.

Under the system, the petty cash fund balance is always maintained at a fixed amount decided on when the fund is first established….The Imprest Petty Cash Fund is Replenished. Count the total funds left in the petty cash Accounting Periods and Methods account at the end of the period. For example, count the balance at the end of the month if you do a monthly reconciliation. Add up the total expenditure listed on each petty cash voucher in the petty cash fund .

While it shouldn’t be a habitual practice, petty cash in a pinch can be used to make change for customers, if the till’s running short. The reconciliation process ensures that the fund’s remaining balance equals the difference between the original balance minus charges detailed on receipts and invoices. If the remaining balance is less than what it should be, there is a shortage. If the remaining balance is more than what it should be, there is an overage. Although there can be minor variances, when unbalanced, the source of the discrepancy should be identified and corrected. On the DV, use payment reason “Z”, and make payable to the custodian of the petty cash/cash drawer account. A reconciliation of the petty cash fund/cash drawer should be completed and reviewed by the custodian’s supervisor periodically.

Making Disbursements From The Fund

The petty cash vouchers provide the documentation for the $80 check request. In the process Mary discovers that the vouchers add up to only $79. Mary will debit the accounts indicated on the petty cash vouchers and then debit Cash Short and Over for $1 . As a company bookkeeping grows, it may find a need to increase the base size of its petty cash fund. The entry to increase the fund would be identical to the first entry illustrated; that is, the amount added to the base amount of the fund would be debited to Petty Cash and credited to Cash.

replenish petty cash entry

Let’s say that at the end of the month, you have $49.15 remaining in your cash box, and you want to top your petty cash fund by $150.85 to get it back up to $200. Cash on hand may also include undeposited cash you have if you have a cash register, such as in retail. You have to keep enough cash on hand to make change for customers and accept payments in cash for those replenish petty cash entry customers who do not use credit or debit cards. Even though the cash economy is getting smaller, there is still often a need to reimburse employees or to quickly pay a delivery driver. A petty cash fund allows a small amount of cash to be kept in a convenient place for miscellaneous expenses. Do you need to stop and grab donuts for this morning’s staff meeting?

In addition, if there is a question with regard to the receipt and if Petty Cash is allowable, UPAY will also seek approval. If the vendor does not normally furnish receipts, the custodian of the fund must verify the expenditure with a written receipt.

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For petty cash accounting, you must create a log detailing your transactions. And, you must record a petty cash journal entry when you put money into the petty cash fund and when money leaves the fund. Consider recording petty cash transactions in your books at least once per month. When entering the petty cash normal balance vouchers I debit the appropriate expense account and credit the A/P account for the person getting the cheque to cash. Most of the time I do this monthly so I would enter each receipt that has been properly authorized on a single line in the purchase journal using the appropriate expense account for the line.

Cash on hand refers to all the money you have in your safe and in bank accounts, including the actual bills and coins you have in your petty cash fund. Typically, companies keep between $30-$300 in their petty cash funds. The use of petty cash is only appropriate for small, erratic expenses that pop up unexpectedly. Even then, a petty cash fund is only appropriate if there is someone to monitor it and track the use of the money. Smaller companies or companies that will seldom use petty cash can skip this step, but be sure to enter the general journal entries when it is time to reconcile the petty cash. Disbursement of petty cash — Every payment out of the petty cash fund will not be journal as a single entry.

Petty cash is a current asset and should be listed as a debit on the company balance sheet. Petty cash, also known as imprest cash, is a fund established for making small payments that are impractical to pay by check. Examples include postage due, reimbursement to employees for small purchases of office supplies, and numerous similar items.

  • If your company is larger, you may need to have more than one fund custodian.
  • Cash, in many cases, remains the quickest, simplest, easiest way to pay for things.
  • A credit to cash over and short account is made for the overage, and a debit to cash.
  • Petty cash replenishment — If the petty cash balance is running low the cash will be replenished by adding money from the bank.
  • When a disbursement is made from the fund, a receipt should be placed in the petty cash box.

They’ll usually keep it in a lockbox or a cash register, and will have some kind of system in place to make sure none of it gets lost. It sure would be nice to have some spare cash around to pay for these small business expenses, wouldn’t it? You need to make a last-minute courier delivery, and the post office closes in 15 minutes. Oh, also, you need to buy your team some food for a late afternoon sprint, and the office printer is out of ink.


Within KFS, a petty cash account is represented by the balance of an object code within a KFS account. Petty Cash funds may be established for payment of minor or infrequent expenses where it is otherwise impractical to obtain a university check or use a procurement card. Petty cash/cash drawer fund controls and procedures ensure that petty cash/cash drawer funds are properly established, maintained, and that the university’s assets are adequately safeguarded. This lesson will introduce you to accounting for receivables. The journal entries regarding booking sales, customer payments and taking credit losses will be illustrated with examples. Petty cash is an important method of running an effective organization.

How To Set Up And Maintain A Petty Cash Account

In this case, you might want to consider installing a camera or taking away access until you figure out who’s stealing. Petty cash is simply any physical cash your business keeps on hand to pay for small, unplanned expenses. Most businesses won’t keep more than a few hundred dollars in petty cash around.

Custodian must indicate the name and UIN of the person who incurred each expense either on the receipt, a scanned attached note, or Document Note. Vendor receipts should show the date, amount, and description of purchases. The three petty cash policies are fixed float, as needed, and unorganized.

Credit cash and write your next petty cash check for the combined total of the money taken from petty cash, $81.27. $81.27 plus the $18.73 already in the lock box restores petty cash to $100.

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