The journal entry is debiting expense $ 400 and credit petty cash $ 400. We have two options to record the replenishment.įor the first option, we separate the transaction into two. It requires replenishment to refill the petty cash balance.Ĭompany needs to record expenses on the income statement and increase the petty cash balance to $ 500. Please prepare a journal entry for petty cash replenishment.Ĭompany ABC uses the petty cash for the expense amount $ 400 and the remaining balance is only $ 100. The remaining balance is only $ 100, so it requires replenishing from the cash on hand accounts. The staff has used petty cash to pay for the taxi $ 100, office supplies $ 200, and other expenses $ 100. ExampleĬompany ABC has a petty cash balance of $ 500. The transaction will end up impacting the expense account and cash-on-hand account. Sometimes, the company decides to combine the transactions above without touching the petty cash account. Account Debit Credit Petty Cash 000 Cash on Hand 000 The second journal entry is debiting petty cash and credit cash on hand (any cash account). Account Debit Credit Expense 000 Petty Cash 000 The first journal entry is debiting expense (small expense) and credit petty cash. There are two transactions that happen at the same time. ![]() At the same time, it records the amount of petty cash that is used to pay for small expenses. The replenish will move the cash from other accounts to the petty cash account. The company needs to replenish the petty cash so that it will increase to a maximum level. ![]() The company will use petty cash and it will keep decreasing to a low level. The petty cash is used to pay for the small expenses that suppliers do not allow to purchase on credit. For these reasons, it is important to weigh the risks and benefits of using company petty cash before making a decision. If they are used to having access to extra funds for small purchases, they may begin to expect it as a regular perk of the job. This can lead to problems down the road, especially if an audit is conducted.įinally, using petty cash can also create a sense of entitlement among employees. If receipts are not properly tracked and filed, it can be difficult to account for all of the expenses. Additionally, there is the possibility of poor record-keeping. If the petty cash is not properly secured, it could be easy for someone with ill intentions to take the money. First of all, there is always the potential for theft or misappropriation of funds. Using company petty cash can be a risky proposition. All in all, company petty cash can be a helpful tool for keeping businesses running smoothly. ![]() Additionally, it can help to build goodwill with vendors when they see that the company is prepared to do business with them on a regular basis. It also helps to streamline the accounting process, as all expenses are recorded in one place. Having petty cash on hand eliminates the need to constantly write cheques or use company credit cards for these small purchases. Petty cash is a designated sum of money that is kept on hand for small, everyday expenses that may come up. Petty cash can be a convenient way for businesses to handle small expenses, but it is important to keep track of all expenditures to avoid overspending.Ĭompany petty cash can be a great boon to businesses, large and small. The petty cash is then replenished with an equal amount of cash. When petty cash is expended, the employee must provide a receipt and explain the purpose of the purchase. Petty cash is used for buying supplies, postage, snacks for employees, and other small business expenses. The cash is typically kept in a locked box or drawer, and only a designated employee, usually the office manager or bookkeeper, has the key. Company petty cash is a small amount of cash kept on hand by a business for the purpose of making small purchases.
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