Petty Cash

Petty cash is a handy item to have for small purchases, but it needs to be accounted for correctly. Do a one-time entry in your books to set up the petty cash account. If you want $300 in the account, credit the bank account you are taking the cash from, and debit your petty cash account. Then put that petty cash in a box. Every time you take some out to spend, keep track of what you've taken out, with a receipt, and at the end of the month you'll have a list that looks like this:

Write a check to petty cash, which will be for the total of what you spent over the month, or $60.82. When you enter that check, credit cash and debit the three appropriate expense account numbers - supplies, small tools and postage. Cash the check, put the cash into the box, and start all over again. You can do this as many times over the month as you need to - every time you need to replenish the petty cash box, just write a check and make the balancing entries the same way. You never make the entries to Petty Cash itself after you initially set up the account, unless you want to make it larger or smaller at some point.

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Expenses Paid by Cheque : Expenses Paid By Cash : Accounts Payable : Cash Discounts on Purchases : Petty Cash : Payroll : Sales & Customer Deposits : Accounts Receivable : Inventory : Deposits : Sale of Assets : Depreciation : Suspense : Month End Adjustments : Paper Trails

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This page last modified: 11 Mar 2008