petty cash replenishment entry

The journal entry to replenish the petty cash account will be as follows. This is to ease the process of recording the accounting transactions and this usually works very well as long as there is proper petty petty cash cash control in place (e.g. dual signatures). In business, we usually need to replenish the petty cash fund when our petty cash box reaches a certain level of the fund or when it is about to be empty.

Nonetheless, the accounting for both items is similar since they involve spending or receiving money. 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.

Increasing/Decreasing Petty Cash/Cash Drawer Funds or Closing an Account

When it’s time to record expenses, such as the end of the month, go back to the Petty Cash Register and click Add Expense. You need to create an expense entry for each receipt that you’re recording from the lockbox. Since Heather is running out of cash, she may ask for replenishment.

Petty Cash: What It Is, How It’s Used and Accounted For, Examples – Investopedia

Petty Cash: What It Is, How It’s Used and Accounted For, Examples.

Posted: Sat, 25 Mar 2017 22:32:55 GMT [source]

As your business grows, you may need to re-evaluate the amount you keep in your petty cash fund. In accounting, we usually record the cash transaction immediately into our accounting record whether it is the cash inflow or the cash outflow from the company. However, when there is a petty cash outflow, we usually do not record it into the accounting record immediately.

Time Value of Money

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own.

Require that employees maintain a running petty cash log for every transaction, including receipts. Each entry in the petty cash book should include the date, the amount, and what was purchased with the petty cash. Review your petty cash register before you replenish the petty cash fund. Most people use petty cash for things like buying office supplies, paying for postage, and so on. One of the conveniences of the petty cash fund is that payments from the fund require no journal entries at the time of payment. Thus, using a petty cash fund avoids the need for making many entries for small amounts.

What Is the Difference in Establishing and Replenishing Petty Cash?

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.

Hence, it is more efficient to just record all those expenses with the cash account directly. Company needs to record expenses on the income statement and increase the petty cash balance to $ 500. Company ABC uses the petty cash for the expense amount $ 400 and the remaining balance is only $ 100. Sometimes, the company decides to combine the transactions above without touching the petty cash account. The transaction will end up impacting the expense account and cash-on-hand account. The petty cash is used to pay for the small expenses that suppliers do not allow to purchase on credit.

Any discrepancy should be debited or credited to an account called Cash Over and Short. The Cash Over and Short account can be either an expense (short) or a revenue (over), depending on whether it has a debit or credit balance. After the owner or bookkeeper records all expenses in the books, cash must be taken from the checking account to replenish the petty cash box. Record the transfer of cash by debiting Petty Cash and crediting Checking Account.

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