Accounting for Petty Cash
Petty cash can be described as small amount of cash which is held within the business property to cover small cash needs. Instances of these types of payments are usually company supplies, paper supplies, coffee, and the like. Petty cash is usually kept in the petty cash drawer as well as box close to where is most required.
There could be numerous petty cash places within a larger company, possibly one for each building or maybe one for every office. A different accounting system is utilized to monitor petty cash purchases.
To put together some sort of petty cash account, often the cashier makes a check in the quantity of the funding designated to the specific petty cash account which is normally several hundred US dollars. As an alternative, the cashier can basically count out the cash for that petty cash account, if there are adequate bills plus coins within the premises. Your initial petty cash journal entry is actually a debit towards the petty cash account as well as a credit towards the cash account.
The particular petty cash custodian after that disburses petty cash through the account in return for receipts associated with what ever the expense might be. There isn’t a journal entry now; rather, the cash balance within the petty cash account is constantly on the decline, even though the amount of receipts constantly increase.
The sum of the receipts along with leftover cash need to equal the original level of petty cash money constantly. Having said that, record errors plus theft can result in the difference from your original funding amount.
Once the cash balance from the petty cash account falls to some enough minimum level, the main petty cash custodian uses extra cash from your cashier. That takes the form of a good summation of the receipts which the custodian accrued. The cashier makes a new check in the quantity of the receipts, as well as swaps the actual check for the particular receipts. Petty cash journal entry is really a debit towards the petty cash accounts along with a credit towards the cash accounts.
The petty cash custodian will refill the petty cash box, which will at this point retain the initial sum of cash which was specified for your account. The cashier produces a journal entry in order to document petty cash receipts. It is a credit towards the petty cash accounts, and most likely debits to many various expense accounts, like the company supplies accounts – based on what was bought using the cash. The total amount within the petty cash account really should at this point be identical to the quantity where it began.
Actually, the balance within the petty cash accounts will be greater than the quantity of cash basically within the petty cash drawer, because the cash in it is continuously getting paid out. Nonetheless, the difference is really minor that it must be entirely unimportant for the results in financial statements. Therefore, the variation is just reconciled once the petty cash drawer needs to be replenished.