Examples of transactions that a petty cash fund is used for include:
- Office supplies.
- Cards for customers.
- Flowers.
- Paying for a catered lunch for a small group of employees.
- Reimbursing an employee for small work-related expenses.
How do you start a petty cash fund?
How do I set up a proper petty cash system?
- Step 1: Get a lockbox or cash register.
- Step 2: Choose a petty cash custodian.
- Step 3: Set an initial amount, a replenishment threshold, and a withdrawal limit.
- Step 4: Go to an ATM, or write a check to petty cash.
- Step 5: Create a petty cash log.
How do you account for petty cash expenses?
The initial petty cash journal entry is a debit to the petty cash account and a credit to the cash account. The petty cash custodian then disburses petty cash from the fund in exchange for receipts related to whatever the expenditure may be.
Which type of account is petty cash?
current asset
Petty cash is a current asset and should be listed as a debit on the company balance sheet. To initially fund a petty cash account, the accountant should write a check made out to “Petty Cash” for the desired amount of cash to keep on hand and then cash the check at the company’s bank.How does a debit to a petty cash account work?
The journal entry for this action involves debits to appropriate expense accounts as represented by the receipts, and a credit to Cash for the amount of the replenishment. Notice that the Petty Cash account is not impacted — it was originally established as a base amount, and its balance has not been changed by virtue of this activity.
What is the journal entry for a petty cash fund?
The petty cash journal entry is a debit to the petty cash account and a credit to the cash account. The petty cash custodian refills the petty cash drawer or box, which should now contain the original amount of cash that was designated for the fund. The cashier creates a journal entry to record the petty cash receipts.
How does a company increase its petty cash fund?
As a company 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.
What does it mean to record petty cash receipts?
The cashier creates a journal entry to record the petty cash receipts. This is a credit to the petty cash account, and probably debits to several different expense accounts, such as the office supplies account (depending upon what was purchased with the cash).
