Petty Cash
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Petty Cash
Most companies have a cashbox in the office to cover small expenses such as paying for stamps, covering taxi rides, etc. When small purchases must be made, it doesn’t make sense to go through the process of writing a cheque. It is in these situations that Petty Cash is used.
- Setting up a petty cash fund:
- This is only done once.
Dr. Petty Cash $50
Cr. Cash $50
To transfer $50 into the petty cash fund.
- Taking $$ Out of petty cash:
No Journal Entry! That’s the point – it’s too small to bother with. ☺
- Replenishing the petty cash fund and recording all of the small costs
- This is usually done once a month.
Dr. Miscellaneous Expense $10.00
Dr. HST Receivable $1.30
Cr. Cash $11.30
To replenish the petty cash box.
Example1 – Basic
- The company has a petty cash fund of $100
- An employee needs cash to cover a cab ride to a client and takes $20 from the petty cash fund.
- The employee takes the cab, gets a receipt for $18 and puts the receipt and change of $2 into the petty cash box.
- At the end of the month, the bookkeeper does the following:
- Counts the amount of cash remaining in the box and there is $82.
- Totals the value of receipts. (should be $18)
- Based on the receipts and the cash ‘gone’, the bookkeeper needs to make the following JE:
- Dr. Taxi Expense 15.93
- Dr. HST Receivable 2.07
- Cr. Cash 18.00
Example 2 – More Complex – have to use Cash Over and Short
- Same facts as above, but when the bookkeeper counts the cash remaining in the box and there’s only $80.50.
- Based on the receipts and the cash ‘gone’, the bookkeeper needs to make the following JE:
- Dr. Taxi Expense 15.93 (based on receipt)
- Dr. HST Receivable 2.07 (based on receipt)
- Cr. Cash 19.50 (based on actual cash in box vs. beginning cash in box)
- Dr. Cash Over and Short 1.50 (to make it balance)