Section 2 The Petty Cash Fund What Youll

Section 2 The Petty Cash Fund What You’ll Learn = How a business establishes a petty cash fund. = How to prepare petty cash requisitions to replenish the petty cash fund. = How to use a petty cash register to record petty cash disbursements. = How to record the journal entry to replenish the petty cash fund. = How to determine whether petty cash is short or over and record the amount of the shortage or overage.

Section 2 The Petty Cash Fund (cont'd. ) Why It’s Important Businesses use petty cash funds because writing checks for small amounts is impractical, costly, and time consuming. Key Terms = petty cash fund = petty cash voucher = petty cash disbursement = petty cash requisition = petty cashier = petty cash register

Section 2 The Petty Cash Fund (cont'd. ) Establishing a Petty Cash Fund = Small, incidental cash payments are made from the petty cash fund. = To establish a petty cash fund, a business estimates the amount of cash needed in the fund for a certain period of time, usually a month.

Section 2 The Petty Cash Fund (cont'd. ) Journalizing the Establishment of the Petty Cash Fund Business Transaction On May 1, Check 2151 for $100 was issued to establish the petty cash fund. JOURNAL ENTRY

Section 2 The Petty Cash Fund (cont'd. ) Making Petty Cash Payments Whenever a cash payment is made, a petty cash voucher is completed.

Section 2 The Petty Cash Fund (cont'd. ) Replenishing the Petty Cash Fund = When the amount of cash in the petty cash box reaches the minimum amount, the petty cash fund is replenished. = Replenishing the petty cash fund restores the fund to its original cash balance.

Section 2 The Petty Cash Fund (cont'd. ) Reconciling the Petty Cash Fund = Add all the paid petty cash vouchers. = This total is then subtracted from the original cash balance of the petty cash fund. = The difference is the reconciled petty cash balance, or the amount of money that should be in the petty cash box. Original balance Total of paid petty cash vouchers $100. 00 – 87. 75 Reconciled petty cash balance $ 12. 25

Section 2 The Petty Cash Fund (cont'd. ) Preparing a Petty Cash Requisition Form = After the petty cash fund is reconciled, the petty cashier prepares a petty cash requisition. = A petty cash requisition is a form requesting money to replenish the petty cash fund.

Section 2 The Petty Cash Fund (cont'd. ) Using a Petty Cash Register = A supplemental record that summarizes the types of petty cash disbursements. = It is not an accounting journal because amounts from this register are not posted to general ledger accounts.

Section 2 The Petty Cash Fund (cont'd. ) Check Your Understanding How do you determine if a petty cash fund is short or over?