PETTY CASH FUND

PETTY CASH FUND

- Money set aside to defray relatively small amounts of cash disbursements.

ESTABLISHMENT OF PETTY CASH FUND: Petty Cash Fund P xx

Cash in Bank P xx

DISBURSEMENT OUT OF PETTY CASH FUND:

 NO journal entries are made when disbursements are made out of the petty cash fund.
 Petty cash payments are INITIALLY recorded in a pretty cash register and supported by signed
petty cash vouchers.

REPLENISHMENT OF PETTY CASH DISBURSEMENTS

Various Expense Accounts P xx
Cash in Bank P xx

However, if at the end of reporting date, the petty cash fund is NOT replenished, the entry would be
credit to petty cash fund, instead of credit to cash in bank.
Various Expense Accounts P xx
Petty cash Fund P xx

- If the entity wished to INCREASE its petty cash fund balance, the journal entry would be:
Petty cash Fund P xx
Cash in Bank P xx

- If the entity wished to DECREASE its petty cash fund balance, the journal entry would be:
Cash in Bank P xx
 Petty cash Fund P xx

SHORTAGE IN PETTY CASH FUND

- When there is a petty cash shortage, the amount of replenishment is INCREASED by the cash shortage in order
to maintained the fixed balance of the fund.
- The entry to record the replenishment when there is a petty cash shortage:
Various Expense Accounts xx
Cash Shortage or Overage xx
Cash in Bank P xx

Most often, shortages in the PCF are treated as RECEIABLE from petty cash custodian because the
petty cash custodian is responsible at all time for the PCF.

OVERAGE IN PETTY CASH FUND

- Where there is a petty cash overage, the amount of replenishment is DECREASED by the cash overage in order
to maintain the fixed balance of the fund.
- The entry to record the replenishment when there is a petty cash overage:
Various Expense Accounts xx
Cash Shortage or Overage xx
Cash in Bank xx

ILLUSTRATION
 On September 1, 2020, the board of directors of ABC Co. passed resolution for the establishment of a P10,000
petty cash fund. Single disbursements amounting to less than P2,000 will be made through this fund. Those amounting to
P2,000 or more will be made through checks. The following were the transactions during the period.

September 1, 2020 Established P10,000 petty cash fund

September 1 through 21, 2020
Disbursements are made for the following:
Groceries for use of employees in the pantry 1,400
Transportation of Mang Benny, the messenger boy 500
Snacks during meetings & conferences 1,000
Gasoline for company vehicles 3,000
Pedicure of Ms. Ana (secretary of the boss) – authorized 3,000
8,900

September 22, 2020 total coins and currencies in the petty cash box is P500. Replenishment is made.

SOLUTION:
September 1, 2020: Petty Cash Fund 10,000
Cash in Bank 10,000

September 1 through 21, 2020 NO ENTRY

SEPTEMBER 22, 2020

Coins and Currencies 500
Add: Petty Cash Vouchers 8,900
Total 9,400
Less: Established PCF (10,000)
Cash (shortage)/Overage (600)

Pantry Supplies 1,400

Transportation (500 + 3,000) 3,500
Meetings and Conferences 1,000
Miscellaneous Expense 3,999
Cash Shortage or Overage 600
Cash in Bank 9,500