Study Notes on Petty Cash Fund

Petty Cash Fund Overview

• Petty cash is a small amount of cash kept for minor expenses.

Establishing a Petty Cash Fund (LO9)

• The amount used to set up the fund is recorded, e.g.,

  • Date: January 19, Amount: $100.00 (Debit: Petty Cash, Credit: Cash).

Making Payments

• Payments from petty cash require a petty cash slip as proof.

Petty Cash Report (LO10)

• Recorded amount discrepancies:

  • Cash Short: Actual cash < Recorded amount.

  • Cash Over: Actual cash > Recorded amount.

• A petty cash report is created for replenishing the fund.

Replenishing Petty Cash (LO11)

• Account titles:

  • Cash Short and Over entries: Debit when cash is short, Credit when cash is over.

• Example of replenishment entry: January 31, total of $35.00 for multiple expenses.

Key Concepts

• Businesses use petty cash for convenience in small transactions.

• The replenishment process involves crediting the Cash account instead of the Petty Cash account.