Replenish Petty Cash


If you plan to use petty cash for small business purchases like postage and office supplies, it may be handy to use the petty cash log to keep track of your transactions. Keeping careful records of cash expenditures will be a huge help when it comes time to reconcile your petty cash account. However, using accounting software, like QuickBooks Online, can make managing petty cash expenses easier and faster because it simplifies the recording of expenses. When a petty cash fund is in use, petty cash transactions are still recorded on financial statements. The journal entry for giving the custodian more cash is a debit to the petty cash fund and a credit to cash.

  • Increased review frequency can uncover problems before material losses accumulate.
  • Petty cash accounts are managed through a series of journal entries.
  • For additional information, see our section on Petty Cash Accounting with Business Credit Cards.

However, keeping too much cash could result in unused funds sitting in an account. The job of a custodian is to approve expenditures, maintain records, and request reimbursements for the fund when the remaining cash is low. The custodian of the petty cash fund is in charge of approving and making all disbursements from the fund.

Nonetheless, the accounting for both items is similar since they involve spending or receiving money. Enter the amount given to the person in the credit column and ask the person to sign the log to verify she received the money. The purpose of this transaction is to refill the petty cash account.

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How to reconcile petty cash

The petty cash log is one of the most important components of managing petty cash. Any transactions made into or out of petty cash need to be recorded on the petty cash log. It’s also important that any money disbursed out of the petty cash fund have a receipt. Petty cash is the money that a business or company keeps on hand to make small payments, purchases, and reimbursements.

To determine which accounts to debit, an employee summarizes the petty cash vouchers according to the reasons for expenditure. The journal entry to record replenishing the fund would debit the various accounts indicated by the summary and credit Cash. A petty cash fund is a small sum of money, typically less than $500, set aside to meet miscellaneous expenses.

Petty Cash

The petty cash account is a current asset and will have a normal debit balance (debit to increase and credit to decrease). Here is a video of the petty cash wave hq reviews process and then we will review the steps in detail. At the very least once a month, if not more often, petty cash transactions should be documented.

In accounting, we usually have the cash over and short account to represent both cash overage and cash shortage as their amount is usually small. Hence, we usually net them off against each other by recording the cash over and short on the debit side for the cash shortage. And if it is a cash overage, we will record it on the credit side instead.

Offset the total with a credit to cash to write your next petty cash check. Most people use petty cash for things like buying office supplies, paying for postage, and so on. The term “petty cash” refers to the small cash fund a business keeps on hand to cover small emergency and unexpected expenses. The term “cash on hand” refers to all the liquid assets a business has. 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.

Replenish Petty Cash Journal Entry

If you don’t document your petty cash purchases, you will not be able to deduct the expenses when you pay business taxes. For petty cash reconciliation, subtract the amount in your petty cash fund from the amount stated in your books. Compare this amount to the total amount listed on your receipts to determine if your accounts are equal. After collecting receipts from your employees, update your books to show the used petty cash. You must debit your Postage, Meals and Entertainment, and Office Supplies accounts and credit your Petty Cash account. For example, employees cannot use petty cash to buy themselves coffee.

Step 1. Ascertain the Stated Balance

The receipt will be used later as back up for recording the petty cash transaction as an expense in your general ledger. If you have an office manager, they’re the most likely choice to manage the petty cash fund. Jane stops to pick up two boxes of donuts, leaving her with $5 in her wallet. Fortunately, her office has a petty cash fund, which her boss immediately reimburses her from, so Jane doesn’t have to submit an expense report and wait for weeks to be reimbursed. A monitoring and tracking system, with receipts, should be used for the petty cash fund.

The Galaxy’s Best Yogurt establishes a petty cash fund on July 1 by cashing a check for $75 from its checking account and placing cash in the petty cash box. At this point, the petty cash box has $75 to be used for small expenses with the authorization of the responsible manager. The journal entry to establish the petty cash fund would be as follows. The Cash Over and Short account will be used to balance the entry when the cash needed to get back to the petty cash account does not match the total of petty cash vouchers.

If you find yourself regularly replenishing your petty fund there could be a larger problem at hand. Every time you replenish your fund, look over the spending log to see where the money’s going. If there are any odd transactions or the numbers don’t add up, you could be looking at theft. In this case, you might want to consider installing a camera or taking away access until you figure out who’s stealing. In his article for the Institute of Internal Auditors, bank auditor Umair Danka notes that there’s a significant risk of petty cash being spent on non-business activities. To combat this, make sure your employees understand upfront what petty cash can and can’t be spent on.

This acts as a receipt, logging the amount of the withdrawal, the date, the purpose, and other details. Increasingly, these slips are electronic ones, entered in a digital spreadsheet or ledger. But it can be helpful to keep paper slips too, along with receipts from the purchases or payments (if possible). Cash on hand is any accessible cash the business or liquid funds have. It can be in the form of actual money, like amounts you haven’t yet deposited in the bank or smaller bills and coins that you keep in the cash register to make change for customers. Petty cash, or petty cash fund, is a small amount of cash your business keeps on hand to pay for smaller business expenses.

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