To replenish a petty cash fund, the correct entry involves two transactions. First, debit the Petty Cash account for the amount of cash on hand. This decreases the Petty Cash account and establishes the amount of cash that needs to be replenished. Next, credit the Cash account for the same amount. This increases the Cash account and records the replenishment of the petty cash fund. By following this entry, the Petty Cash account is updated with the new balance, and the Cash account reflects the amount that was added to the fund.
Petty Cash Fund Basics
A petty cash fund is a small amount of cash that is used for minor expenses, such as office supplies, postage, or travel expenses. Petty cash funds are typically replenished on a regular basis, such as monthly or quarterly.
There are two main ways to replenish a petty cash fund:
- The imprest system: Under the imprest system, the petty cash fund is replenished to its original amount each time it is depleted. This system ensures that there is always a fixed amount of cash available in the fund.
- The fluctuation system: Under the fluctuation system, the petty cash fund is replenished only when it falls below a certain balance. This system allows the fund to fluctuate in size, depending on the level of activity.
The correct entry to replenish a petty cash fund depends on the system that is being used.
| System | Entry |
|---|---|
| Imprest system |
Debit: Petty Cash Credit: Cash |
| Fluctuation system |
Debit: Petty Cash Credit: Cash |
Replenishing a Petty Cash Fund: The Correct Entry
Maintaining a petty cash fund requires regular replenishment to ensure its availability for minor expenses. The correct accounting entry involves debiting the specific expense accounts for the actual expenditures and crediting the petty cash account to restore its initial balance.
Here’s a step-by-step guide to recording petty cash replenishment:
- Gather supporting documentation: Collect receipts, invoices, or other supporting documentation for all expenses incurred from the petty cash fund.
- Calculate total expenses: Sum up the amounts from the supporting documentation to determine the total expenses incurred since the last replenishment.
- Create a journal entry: Record the replenishment transaction in the general journal as follows:
| Account | Debit | Credit |
|---|---|---|
| Specific Expense Accounts (e.g., Office Supplies, Travel Expenses) | Total Expenses | — |
| Petty Cash | — | Total Expenses |
Post to the ledger: Update the balances in the respective expense accounts and the petty cash account in the general ledger, reflecting the replenishment.
Note: The specific expense accounts debited will vary depending on the nature of the expenses incurred.
Replenishing a Petty Cash Fund
A petty cash fund is a small amount of cash kept on hand to cover minor expenses. When the fund is low, it must be replenished. The correct accounting entry to replenish a petty cash fund is to debit the Petty Cash account and credit the Cash account.
Account Considerations
- **Petty Cash:** The debit to the Petty Cash account increases the balance of the account, reflecting the replenishment of the fund.
- **Cash:** The credit to the Cash account decreases the balance of the account, representing the outflow of cash used to replenish the petty cash fund.
Example
Suppose that a company’s petty cash fund is replenished with $50. The following accounting entry would be made:
| Account | Debi | Credit |
| Petty Cash | $50 | |
| Cash | $50 |
This entry increases the Petty Cash account balance by $50 and decreases the Cash account balance by $50, accurately reflecting the replenishment of the fund.
When to Replenish a Petty Cash Fund
A petty cash fund is a small amount of cash kept on hand to pay for minor expenses that cannot be easily paid by check or credit card. The fund is typically replenished when it reaches a predetermined low balance.
Supporting Documentation for Replenishment
When replenishing a petty cash fund, it is important to have supporting documentation for all expenses that were paid from the fund. This documentation can include receipts, invoices, or other records that show the date, amount, and purpose of each expense.
- Receipts for all purchases
- Invoices for all services
- Other records that show the date, amount, and purpose of each expense
Correct Entry to Replenish a Petty Cash Fund
The following is the correct entry to replenish a petty cash fund:
Petty Cash XXX Cash XXX
This entry will increase the petty cash account by the amount of the replenishment and decrease the cash account by the same amount.
Table: Replenishing a Petty Cash Fund
|Account|Debit|Credit|
|:—:|:—:|:—-:|
|Petty Cash|XXX||
|Cash||XXX|
That’s all there is to it! Replenishing a petty cash fund is a straightforward process that can be easily managed. Remember, accuracy and documentation are key. By following these steps, you can ensure that your petty cash fund is always in good shape. Thanks for reading! If you have any other questions about petty cash or accounting in general, be sure to check out our other articles. We’re always here to help.