Solved Record the journal entry on September 30 to replenish the fund .

To increase an expense account, you would need to debit the account, and to decrease your cash account, which is an asset, you would need to credit the account. If you’re familiar with accounting terms, you know that journal entries are simply a record of all of your business transactions. They are the first step in the accounting cycle, and perhaps the most important, as they represent all of the financial activities that will affect your business.

Compare this amount to the total amount listed on your receipts to determine if your accounts are equal. After collecting receipts from your employees, update your books to show the used petty cash. You must debit your Postage, Meals and Entertainment, and Office Supplies accounts and credit your Petty Cash account. Lastly, you should choose a maximum amount that employees can request for petty cash transactions. If the employee needs to spend more than the petty cash request limit, they can use the business credit card. An employee using petty cash should provide a receipt for the purchase to the petty cash custodian.

The cash over and short account

These errors cause the cash in the fund to be more or less than the amount of the fund less the total vouchers. When the fund is replenished, the credit to Cash is for the difference between the established amount and the actual cash in the fund. Any discrepancy should be debited or credited to an account called Cash Over and Short. The Cash Over and Short account can be either an expense (short) or a revenue (over), depending on whether it has a debit or credit balance. A controller conducts a monthly review of a petty cash box that should contain a standard cash balance of $200.

Alternatively, credit your cash short and over account by the amount of cash over. In the example, debit your cash short and over account by $10 to record the cash short amount. Balthier Enterprises is a small business that sells and rents out video games.

Petty cash do’s and don’ts

In this case, the expense balance decreases, and the year-end balance is the net balance from all overages and shortages during the year. The Cash Over and Short account will be used to balance the entry when the cash needed to get back to the petty cash account does not match the total of petty cash vouchers. Remember, for all journal entries, total debits must equal total credits.

This usually happens when we make mathematical errors during the day of the sales. Calculate the sum of the petty cash account’s vouchers you created during the accounting period to determine how much cash you distributed during the accounting period. In the example, if you have $300 in vouchers for office supplies and $140 for transportation expense, add $300 to $140 to get $440 in total vouchers created during the period.

Most popular questions for Business-studies Textbooks

Let’s now assume that when the petty cash fund is replenished, there is $6.00 on hand and there are $93.00 of petty cash vouchers. Company ABC has a petty cash fund that the general ledger records show as being at a balance of $50. The petty cash short and over cash fund account currently has $32 in cash and $15 in receipts. These two amounts show that the petty cash fund is $3 short of the amount recorded in the general ledger, as the total of the cash and receipts is only $47 ($32 + $15).

• The journal entry for this accounting treatment is as follows.
• The cash over and short account is used when an imprest account, such as petty cash, fails to prove out.
• The employee in charge of the petty cash box should sign each receipt when the purchase is made.
• When the company has the cash overage in the petty cash fund, it can make the journal entry by debiting the expenses account and crediting the cash over and short account together with the cash account.
• However, if the actual cash amount is lesser, it is called cash short.

Give the receipt to your finance department or the person who handles your small business books. After posting to the ledger (we’ll use T accounts here), the checking account balance will go down by $100 and the petty cash balance will go up by $100. In contrast, let’s assume that during the cash count, the actual cash from the cash sales is $495 instead of $510.

What Is the Purpose of a Journal Entry?

For example, the Galaxy’s Best Yogurt maintains a petty cash box with a stated balance of $75 at all times. Upon review of the box, the balance is counted in the following way. Usually one individual, called the petty cash custodian or cashier, is responsible for the control of the petty cash fund and documenting the disbursements made from the fund. By assigning the responsibility for the fund to one individual, the company has internal control over the cash in the fund. In practice, this journal entry will also incorporate other aspects of the underlying transactions.

• Notice that the appropriate expense accounts are debited and that cash is credited.
• At the end of July, in the petty cash box there should be a receipt for the postage stamp purchase, a receipt for the milk, a receipt for the window cleaner, and the remaining cash.
• Cash over and short is an account to record cash discrepancies for companies dealing in cash transactions.
• During closing the register, Red Co. counted its cash in the drawer, which amounted to $520.
• In the example, debit the office supplies expense account for $300, and debit the transportation expense account for $140.

Gift cards have become an important topic for managers of any company. Understanding who buys gift cards, why, and when can be important in business planning. This is posted to the Cash T-account on the credit side beneath the January 14 transaction. Accounts Payable has a debit of $3,500 (payment in full for the Jan. 5 purchase). You notice there is already a credit in Accounts Payable, and the new record is placed directly across from the January 5 record.