Petty Cash
- Petty Cash account defined
- "Petty Cash" is not the name of an expense account like "Supplies," "Repairs," and so forth.
- Do not write a check for some miscellaneous item and charge it to "Petty Cash."
- Petty Cash is a cash fund that should be treated as though it were a checking account.
- In QuickBooks you should create an account called "Petty Cash" as type called Bank.
- Setting up the Petty Cash account.
- After getting a lockbox, canvass bag, or jar to keep the Petty Cash in, decide how much you will keep in Petty Cash.
- Let's say that you decide on $100.00. Write a check for $100.00 and charge this check only to Petty Cash.
- Cash the check.
- Put the cash in the lockbox, canvass bag, or jar.
- How to pay a small expense from Petty Cash.
- While you were out, you bought $1.40 worth of postage stamps.
- You could write a check for $1.40 to yourself as reimbursement, but you do not want to write such small checks.
- Put the receipt for $1.40 in the petty cash container and take just that amount out.
- At any and all times, the total of the cash and the receipts in the petty cash container must equal $100.00.
- It is perfectly OK that the Balance Sheet always shows $100 in the Petty Cash account when it actually has less than $100 cash because it does have a total $100 combined cash and receipts at all times.
- Replenishing the Petty Cash fund
- After several months, the cash remaining in the Petty Cash container is only $4.60.
- The receipts total $95.40.
- Add up the receipts by expense categories.
- Write a check to Cash for $95.40.
- Charge it to the various expenses, for example:
- Cash the check.
- Put the money back into the Petty Cash container.
- The total will be $100.00.
Supplies34.11Repairs28.00Car Expense16.40Business Entertainment16.89 - Increasing the Petty Cash fund
- After a few weeks you realize that you are having to write the replenshment check every few weeks.
- The whole idea of having a Petty Cash fund is to make things simpler, not add one more frequent task.
- You decide that it would be much better if the Petty Cash fund were $300 instead of $100.
- Write a check for cash for $200. Charge it to Petty Cash. This will increase the "floating" balance to $300.
- Decreasing the Petty Cash fund
- A year later you decide that $300 in the Petty Cash fund is too much. You really only need $100 now because you are not using the fund as much now as a year ago.
- Take $200 cash out of the container.
- Make a bank deposit for $200.
- In QuickBooks, charge the $200 to Petty Cash.
- That will reduce the book balance to $100 from $300.