JournaldrillPetty cash
Set up a petty cash fund by debiting Petty Cash and crediting Cash. No entries are made as small payments are taken; when the fund is replenished, debit the expenses shown by the receipts, use Cash Short and Over for any difference, and credit Cash for the amount that restores the fund.
Syntax
Set up: Dr Petty Cash / Cr Cash; Replenish: Dr Expenses (per receipts), Dr/Cr Cash Short and Over / Cr Cash| Part | What it is |
|---|---|
Petty Cash | Asset account for the fund's fixed amount; touched only when the fund is created, increased or decreased. |
Cash Short and Over | Debited for a shortage (expense), credited for an overage (revenue). |
Imprest system | The fund always returns to the same fixed amount after replenishment. |
Examples
Dr Petty Cash 300 / Cr Cash 300Result: Cash moved from the bank account to the petty cash box
Fund established at 300.
Dr Postage Expense 45, Dr Office Supplies Expense 120, Dr Delivery Expense 80, Dr Cash Short and Over 5 / Cr Cash 250Result: Expenses 245 plus a 5 shortage; fund back to 300
Receipts total 245 but only 50 remains in the box, so 250 is needed and 5 is unexplained.
Dr Petty Cash 200 / Cr Cash 200Result: Fund increased from 300 to 500
Only a change in the fund size touches the Petty Cash account.
Common mistakes
- Debiting Petty Cash when replenishing: replenishment debits the expenses, not the fund account, which stays at its fixed amount.
- Recording an entry every time cash is taken from the box: expenses are recorded in one batch at replenishment.
- Ignoring a shortage: the difference between receipts plus cash on hand and the fund total goes to Cash Short and Over.
Practice Petty cash
These drills check your answer on live data, free, no account needed.
- Replenishing petty cashQuarry Street Dental keeps a $300 petty cash fund. At month end the fund holds receipts for postage of $46.25, office supplies of $78.40 and delivery charges of $52.10, plus $119.75 of cash. The custodian receives a check to bring the fund back to $300. Record the replenishment.
Questions
What is the journal entry to replenish petty cash?
Debit each expense supported by the receipts, debit (or credit) Cash Short and Over for any difference, and credit Cash for the amount that restores the fund.
Is petty cash an asset?
Yes. It is part of cash on the balance sheet and is usually combined with other cash in the financial statements.
Why replenish petty cash at the end of the period?
So the expenses paid from the fund are recorded in the correct period, even if the fund is not low.
Related
- Credit card salesHow to record a sale paid by card: Dr Cash for the net deposit, Dr Credit Card Expense for the fee, Cr Sales Revenue for the full price. Receivable variant.
- Paying accounts payableHow to record paying a supplier: debit Accounts Payable, credit Cash. Covers partial payments, paying within a discount period and the expense mistake.
- Cash saleHow to record a cash sale: debit Cash, credit Sales or Service Revenue. For merchandise under a perpetual system add Dr Cost of Goods Sold, Cr Inventory.
- Journal entry formatThe standard journal entry format: date, debit accounts first, credits indented, amounts in two columns and a short explanation. Simple and compound examples.