Name: Niel Sinclair Grade: 11G Subject Accounts Topic: Petty Cash On occasion, each business thinks that itis helpful to have limited quantities of money accessible for guaranteed installment of things, for example, conveyance charges. postage stamps, taxi tolls, dinner cash for representatives staying at work longer than required, and other little things. To allow these money payments and still Keep up with sufficient command over cash, organizations often set up a petty cash fund of a round figure such as, for example, $100 or $500. The trivial money account is a current resource and will have a typical charge balance (charge to increment and credit to diminish). Here is a video of the negligible money cycle and afterward we will audit the means exhaustively. Petty Cash Example 1) Prepare the entry to replenish the Php 200 petty cash fund of Warner Company, assuming, the fund has receipts for: freight-out Php 60, postage Php 105, and miscellaneous expense Php 20. The fund contains Php 12 in cash. Answer Freight-out Postage Expense.. Miscellaneous Expense Cash Over and Short Cash (Php 200 ~ Php 12) Requirements for Petty Cash ‘The use of a petty cash fund can circumvent certain internal controls, However, the availability of petty cash doesn't mean that it can be accessed for any purpose by any person. Many companies employ strict intemal controls to manage the fund. Often, a few individuals are authorized to approve disbursements and can only do so for expenses related to legitimate company activities or operations.A petty cashier might be assigned to issue the check to fund the petty cash drawer and make the appropriate accounting entries, The petty cash custodian is charged with distributing the cash and collecting receipts for all purchases or any uses of the funds. As the petty cash total declines, the receipts should increase and add up to the total amount withdrawn. By having a petty cash cashier and a petty cash custodian, the cual-process helps to keep the funds secure and ensure that only those authorized have access to it. Recording Petty Cash ‘When a petty cash fund is in use, petty cash transactions are still recorded on financial statements. No accounting journal entries are made when purchases are made using petty cash, it’s only when the custodian needs more cash—and in exchange for the receipts, receives new funds—that the journal entries are recorded. The journal entry for giving the custodian more cash is a debit to the petty cash fund and a credit to cash, If there's a shortage or overage, a journal line entry is recorded to an over/short account. If the petty cash fund is over, a credit is entered to represent a gain. If the petty cash fund is short, a debit is entered to represent a loss. The over or short account is used to force-balance the fund upon reconciliation. Reconciling Petty Gash The petty cash fund is reconciled periodically to verity that the balance of the fund is correct. ‘Typically, as the petty cash balance falls to a preset level, the custodian applies for additional cash from the cashier. At this time, the total of all of the receipts is calculated to ensure that it matches the disbursed funds from the petty cash drawer. If new funds are needed, the cashler writes a new check to fund the petty cash drawer and takes, in exchange, the receipts from the purchases that depleted the cash. ‘The reconciliation process ensures that the fund's remaining balance equals the difference between the original balance minus charges detailed on receipts and invoices. If the remaining balance Is less than what it should be, there is a shortage. If the remaining balance is more than what it should be, there is an overage. Although there can be minor variances, when unbalanced, the source of the discrepancy should be identified and comected. Petty Cash vs. Cash on Hand "Petty cash" and "cash on hand" sound a lot alike, and they do overlap. Of the two, "cash on hand” is the more generic term.Petty cash refers specifically to money—literelly, coins and bills—that a company keeps on hand for small outlays, usually because using cash is easier than using a check or credit card. Cash on hand is any accessible cash the business or liquid funds have. It can be in the form of actual money, like amounts you haven't yet deposited in the bank or smaller bills and coins thet you keep in the cash register to make change for customers. In this meaning, the difference from petty cash refers to where you're keeping the money, and how you're using it with petty cash being more for intemal business needs/expenses by employees, and cash in hand referring to funds received from or being reimbursed to customers. But cash on hand has a larger meaning, as an accounting term. In the financial world, it also refers, toa company's highly liquid assets: funds in checking or other bank accounts, money market, funds, short-term debt instruments, or other cash equivalents. Though not literally cash, i's money that can be easily and quickly accessed, which is why it’s "on hand.”