petty cash fund journal entry

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noiembrie 26, 2016

This initial setup amount is sometimes referred to as your float. At all times Mary should have some combination of cash and petty cash vouchers (receipts) that are equal to $100. At this point, the petty cash box has $75 to be used for small expenses with the authorization of the responsible manager. A person who is in possession of the cash in the organization is generally called cashier. ***This is not the "correct - most often taught in text books" way to do petty cash but of course ... it's the method I prefer.Credit (Decrease) Petty Cash (current asset account on the balance sheet) - If you use QuickBooks®, make the entries using Write Cheques so that your sales tax calculates properly. There are two ways to manage a petty cash fund. Assume that the local bookstore determined that $100 cash should be kept on hand for miscellaneous expenses. The required entry to record a decrease in the fund debits Cash and credits Petty Cash for the amount returned and deposited. All Rights Reserved. The totals in the journal are then used as the basis for a journal entry into a company's general ledger. 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 vouchers have been examined and approved, a check is created for $92.60 which restores the cash in the fund to its $100 balance. If you are not a GST/HST registrant, book the tax to an "expense type" of account on your P&L. This is an example where it makes sense to break the internal control principle of paying all expenses by cheque/check. (1) To setup your petty cash fund, write a cheque and code it: Debit (Increase) Petty Cash (current asset account on the balance sheet) Credit (Decrease) Cash in Bank (current asset account on the balance sheet). The journal entry to record replenishment is: Note that the entry to record replenishing the fund does not credit the Petty Cash account. At this point, the petty cash box has $75 to be used for small expenses with the authorization of the responsible manager. Bookkeeping Entries Index After a department is set up with a petty cash fund, receipts are collected for expenses paid out of the fund. Restoring the fund to $100 requires a check for $93.90 ($100 fund amount – petty cash remaining $6.10). You should have vouchers AND receipts for EVERY disbursement and each receipt needs to be entered individually NOT as a group ie. 2. A business establishes a petty cash fund by writing a check for, say, $100. There are two ways to manage a petty cash fund. At times, every business finds it convenient to have small amounts of cash available for immediate payment of items such as delivery charges, postage stamps, taxi fares, supper money for employees working overtime, and other small items. Do not duplicate without permission. The entry to replenish petty cash fund includes a debit to Petty Cash and a credit to Cash. Help support this site by "liking" me! *GST/HST is a value added sale tax in Canada. Policies should be established regarding appropriate expenditures (type and amount) that can be paid from petty cash. Following are the typical transactions connected to petty cash fund. The cashier creates a journal entry to record the petty cash receipts. The journal entry to establish the petty cash fund would be as follows. This journal entry, in essence, subdivides the petty cash portion of available funds into a separate account. The same person is responsible for the appropriate accounting of each cash transaction done through him. The entry to increase the petty cash fund by  $400 would be: A company may feel it is time to close the petty cash fund. LO 8.5On May 2 Kellie Company has decided to initiate a petty cash fund in the amount of $1,200.Prepare journal entries for the following transactions: On July 5, the petty cash fund needed replenishment, and the following are the receipts: Auto Expense $125, Supplies $368, Postage Expense $325, Repairs and Maintenance Expense $99, Miscellaneous Expense $259. Journal entry for putting money into the petty cash fund The entry must show an increase in your Petty Cash account and a decrease in your Cash account. Disbursements: Individual disbursements from petty cash are not recorded via a journal entry. To illustrate, assume in the preceding example that the balance in the fund was only $6.10 instead of $7.40. > Creation: Petty cash fund may be created by drawing a check on the company's checking account and handing it over to the custodian of the fund. Here's where I post current information. If you have a double-entry bookkeeping system, the initial general journal entry would look like this: Debit Petty Cash $100. All Rights Reserved. We will not use the petty cash in a journal entry again unless we are changing this original amount. Companies replenish the petty cash fund at the end of the accounting period, or sooner if it becomes low. Petty cash accounts are managed through a series of journal entries. Use the search feature to quickly find theinformation you're looking for. We would debit all vouchered items. Petty Cash is a small amount of cash that needs to be kept in the office for the utilization of daily small expenditures. To determine which accounts to debit, an employee summarizes the petty cash vouchers according to the reasons for expenditure. Smaller companies or companies that will seldom use petty cash can skip this step, but be sure to enter the general journal entries when it is time to reconcile the petty cash. These errors cause the cash in the fund to be more or less than the amount of the fund less the total vouchers. Click on the image to learn more. Small Business Accounting Thus, using a petty cash fund avoids the need for making many entries … The petty cash account should be reconciled and replenished every month to ensure the account is balanced and any variances are accounted for. Write the journal entry when the petty cash fund is established. Listed Under Websites NOT Local Business. QuickBooks® is a registered trademark of Intuit Inc. If the petty cash custodian finds that the petty cash fund is larger than needed, the excess petty cash should be deposited in the company’s checking account. > Once the purchase is made, the receipt should be attached to the voucher and any change returned to petty cash. The petty cash journal contains a summarization of the payments from a petty cash fund. Write the amount of the check you wrote for petty cash after this entry. A two-line journal entry should be recorded for this transaction: Line 1: Petty Cash: Debit: 100.00; Line 2: Cash: Credit: 100.00; As the entry indicates, no funds have been spent on miscellaneous expenses thus far. This is done when you replenish the fund. Generally, the following expe… At all times, the employee responsible for petty cash is accountable for having cash and petty cash vouchers equal to the total amount of the fund. When the fund is replenished, the credit to Cash is for the difference between the established amount and the actual cash in the fund. Each time a reconcilation of petty cash is done, remove the "posted" receipts from the petty cash box and attach all the receipts to your petty cash reconciliation ... then replenish the fund. 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. 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