Petty Cash Accounting

The Type of Account and Normal Balance of Petty Cash

Generally speaking, the balances in temporary accounts increase throughout the accounting year. Remember, for all journal entries, total debits must equal total credits. Companies replenish the petty cash fund at the end of the accounting period, or sooner if it becomes low.

  • A petty cashier might be assigned to issue the check to fund the petty cash drawer and make the appropriate accounting entries.
  • This amount represents any difference between the actuarially determined annual required contribution and actual payments made to the pension fund.
  • Usage – All payments to the owner/manager including holiday and vacation pay.
  • The credit balance in Accumulated Depreciation will continue to grow until an asset is sold or scrapped.

Usage – Miscellaneous assets owned by the business not covered by other asset accounts. Usage – Cost of furniture and fixtures, fans, office equipment and parts room equipment including sales tax.

Start Logging Your Small Expenses With A Petty Cash Log Template

Usage – All payments to the owner/manager including holiday and vacation pay. Usage – The gain or loss on the sale of a fixed asset such as land, buildings, shop equipment, furniture, fixtures, cars, trucks or trailers. Usage – Other income from vending machines, profit or loss in the transfer of equipment, scrap sales. Usage – The adjustment account to adjust the general ledger to make it agree with the physical parts inventory. Usage – Repair work, both parts and labor performed by outside shop. Usage – All insurance premiums such as worker’s compensation, for a future time period. Usage – Cash deposits received from customers on order for future delivery of new equipment.

Many different textbooks break the expenses down into subcategories like cost of goods sold, operating expenses, interest, and taxes, but it doesn’t matter. Alternately, they can be listed in one column, indicating debits with the suffix «Dr» or writing them plain, and indicating credits with the suffix «Cr» or a minus sign. This means that Company A is an account payable, as money is owed to the customer, rather than the other way around. For example, on February 05, 2020, the company ABC Ltd. bought the inventory in with a cost of $500 on credit. That’s because they’re the foundation of your general ledger and every account in your chart of accounts. With a net loss or debit balance, you need to credit the account for the balance amount.

Cards In This Set

Let’s say that at the end of the month, you have $49.15 remaining in your cash box, and you want to top your petty cash fund by $150.85 to get it back up to $200. Small businesses will often record all disbursements in a log and put one person in charge of petty cash to make sure none of the funds go missing. Petty cash is simply any physical cash your business keeps on hand to pay for small, unplanned expenses. Most businesses won’t keep more than a few hundred dollars in petty cash around.

Use the Standard button to enter the regular checking account from which the petty cash will normally be deducted. In this example that will be GL# 1000 My Checking Account. Also under the Standard Accounts button enter for reach school the appropriate GL# – in our example it would be 1002 Petty Cash as the account to which the money is being deposited. It’s really being deposited into the school’s petty cash box at the center, but you get the idea.

Chart Of Accounts General Usage

When the petty fund is replenished, usually by drawing on a company-issued check, it’s recorded as a debit to the petty cash account and a credit to the cash account. We have debit cards and credit cards that allow us to spend money directly from our checking account or from our line of credit with our bank . In this sense, debits are viewed as money drawn from our bank account, and credits are viewed as money available to spend or borrow from the bank.

Usage – Tires and Tubes sold on customer repair orders. Usage – Parts sold over the counter to retail customers. Usage – Parts sold internally for used equipment reconditioning. Usage – State unemployment tax imposed on the business. There are several states where the employer and the employee share the cost of this tax. Usage – Salaries, commissions, incentives and wages of employees and offices.

The petty cashier spends the imprest cash during the period. At the end of the period, the petty cashier submits the statements covering petty expenditures to the chief cashier. At the end of fixed period, the petty cashier submits the details of petty expenses, and the chief cashier again advances a fixed amount for the next fixed period. In all businesses, some payments are made by check for better control over cash.

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This means there’s a potential risk of a significant mismatch in balance sheets. Just because these amounts are small, it doesn’t mean they’re not important to track. Over time, they can add up and you might not usually think about tracking these tiny amounts. However, there are important reasons why petty cash and knowing how to track it is essential. The financial statements are key to both financial modeling and accounting. This a visual aid that represents an account in the general ledger.

The Type of Account and Normal Balance of Petty Cash

Usage – Collection of fees paid to the state for battery sales. Required supplies or forms used in connection with computerized services. Usage – Expenses incurred for auditing, tax and collection services. Usage – Operating cost of all licensed vehicles not used for pick-up, delivery, or service includes gasoline, oil and grease, tire repairs and washing. Usage – Repairs to building, janitorial services, minor real estate improvements, building maintenance supplies. Usage – 50/50 warranty agreement with customer on used equipment.

Templates for recording account data with customizable checklists ensure standardized petty cash records across the organization. The petty cash balance should be sufficient to support the amount of activity expected in the account, and will typically be a reflection of the size of the company. Small businesses are just as likely to have a petty cash fund as a large corporation, but the total amount in the fund will vary. Increase accuracy and efficiency across your account reconciliation process and produce timely and accurate financial statements. Drive accuracy in the financial close by providing a streamlined method to substantiate your balance sheet. Again, equity accounts increase through credits and decrease through debits.

Secure The Funds

Designating a custodian establishes accountability and reduces the incidence of error or fraud by minimizing the number of employees who have access to the cash in the fund. BlackLine and our ecosystem of software and cloud partners work together to transform our joint customers’ finance and accounting processes. Together, we provide innovative solutions that help F&A teams achieve shorter close cycles and better controls, enabling them to drive better decision-making across the company.

The Type of Account and Normal Balance of Petty Cash

An unconditional written promise signed by the maker to pay a certain sum of money one year or more after the issuance date. Amounts remaining to be paid on capital lease agreements. Amounts remaining beyond the period of one year to be paid on compensated absences balances.

Debit the corresponding sub-asset account when you add money to it. And, credit a sub-asset account when you remove money from it. But, how much do you know about the accounts they affect? If the vouchers total $130 but the fund needs only $125, the journal entry includes a $5 credit to the cash over and short account. A cash short refers to the shortage of funds that are less than the expected balance. This is where management may decide to use petty cash funds for the extra refreshments.

  • At the time of the audit, the petty cash custodian must provide a full accounting of the fund.
  • Here is a video of the petty cash process and then we will review the steps in detail.
  • In this example that will be GL# 1000 My Checking Account.
  • After a designated interval—usually, the same time each month or week—it’s time to reconcile or balance the petty fund account.
  • Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology.
  • Kristen has her Bachelor of Arts in Communication with certificates in finance, marketing, and graphic design.

Appendix E provides criteria to distinguish whether a purchase is a supply or a piece of machinery or equipment. 242 Accumulated Depreciation on Machinery and Equipment. Accumulated amounts for the depreciation of machinery and equipment. Individual items or collections of items that are of artistic or cultural importance. 252 Accumulated Depreciation on Works of Art and Historical Collections. Accumulated amounts for the depreciation of works of art and historical treasures.

How Do I Set Up A Proper Petty Cash System?

In order to ensure that all fiscal year expenses are correctly recorded, all petty cash Custodians are required to replenish their petty cash during the month of June. The petty cash fund Custodian must attach the sales receipt to the back of the “Petty Cash Voucher Slip”. If a receipt is lost or misplaced, the “Missing Receipt Affidavit Form” should be attached to the “Petty Cash Voucher Slip”. Section 3 – If petty cash fund purpose is to pay Human Subject Payments, please include an estimated project end date. When all monies received including cash are deposited in the checking account, you will need to transfer cash into your petty cash box.

Instead of sending out an employee who is already present, they can ask an employee who hasn’t yet clocked in to stop and pick up the snacks and beverages The Type of Account and Normal Balance of Petty Cash on the way. This employee then uses their own money to purchase these items but is quickly reimbursed with the petty cash fund upon returning to work.

Related To Petty Cash

Compare this amount to the sum of the individual accounts payable ledgers. This will help you discover any errors you made in recording your payables. A reconciliation might also help you catch any errors on vendor bills.


If the numbers don’t match, that means something went wrong, and you need to review each expense for any discrepancies. Make sure everyone with access to petty cash funds knows what they’re for, and provide some examples of typical petty cash expenses to make sure there’s no confusion. Notice how the far right-hand row lists the current balance of the petty cash fund? This lets you reconcile—that’s fancy accounting speak for “double check”—your petty cash fund on the fly.

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