petty cash replenishment entry

Lastly, you should choose a maximum amount that employees can request for petty cash transactions. If the employee needs to spend more than the petty cash request limit, they can use the business credit card. For example, employees cannot use petty cash to buy petty cash themselves coffee. The journal entry is debiting expense $ 400 and credit petty cash $ 400. The first journal entry is debiting expense (small expense) and credit petty cash. Finally, using petty cash can also create a sense of entitlement among employees.

petty cash replenishment entry

During the period, ABC Co. also received $500 from a customer as cash. The company decided to use this amount to reimburse its petty cash account. As stated above, the most common source of transactions in the petty cash account is spending. The only occasions in which a posting is made to the petty cash account in the general ledger is when the amount of the imprest (petty cash fund) is permanently altered. At the time the entry is made, the custodian will receive a $315 check that’s cashed and the money placed in the lockbox. Overall, there’s a total of $500 in the lockbox after replenishment.

Establishing a Petty Cash Fund

Our policy states that petty cash reimbursements shouldn’t exceed 10% of the fund balance. This means that expenses above $50 cannot be charged to petty cash. However, we can also specify that certain expenses are always chargeable to petty cash, even if they’re above $50.

  • When disbursing cash from the fund, the petty cash custodian prepares a petty cash voucher, which should be signed by the person receiving the funds.
  • When you or employees pay with petty cash, retain the receipt and attach the petty cash slip to the receipt for your records.
  • Count the cash remaining in the lock box and add up the receipts.
  • The imprest petty cash system is a method of accounting for petty cash expenses.
  • For example, employees cannot use petty cash to buy themselves coffee.
  • It is important to realize that the $80 check will be credited to Cash (the company’s checking account).

No matter what, ensure anyone with that title and responsibility is trustworthy and loyal to the company. Go back to the Chart of Accounts screen and look for Petty Cash Account. On the far right of the column, click View Register to arrive at the petty cash register. To maintain internal controls, managers can use a petty cash receipt (Figure 8.5), which tracks the use of the cash and requires a signature from the manager.

Replenishing Petty Cash Funds

For example, you might send an employee to pick up office supplies, like staples or printer paper. You would use your petty cash fund to reimburse your employee for the purchase of the supplies. Read on to learn about establishing a petty cash fund, handling petty cash accounting, reconciling your petty cash account, and claiming a tax deduction. At the end of the month, assume the $100 petty cash fund has a balance of $6.25 in actual cash (a five-dollar bill, a one-dollar bill, and a quarter). Frank, who is the responsible person, has been filling out the voucher during the month, and all the receipts are stapled to the voucher. After all, the petty cash expenses will only be recorded when we make petty replenishment.

petty cash replenishment entry

To do this, a check is written on the main checking account for the needed amount and is recorded as a credit to Cash. Vouchers are then used to determine which general ledger accounts should be debited. Any difference in the debits and credits is then recorded in the Cash Short and Over account on the income statement.