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Section 2 The Petty Cash Fund

Chapter 22. Section 2 The Petty Cash Fund. $. What You’ll Learn How a business establishes a petty cash fund. How to prepare petty cash requisitions to replenish the petty cash fund. How to use a petty cash register to record petty cash disbursements.

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Section 2 The Petty Cash Fund

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  1. Chapter 22 Section 2 The Petty Cash Fund $ • What You’ll Learn • How a business establishes a petty cash fund. • How to prepare petty cash requisitions to replenish the petty cash fund. • How to use a petty cash register to record petty cash disbursements. • How to record the journal entry to replenish the petty cash fund. • How to determine whether petty cash is short or over and record the amount of the shortage or overage. $ $ $

  2. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Why It’s Important Businesses use petty cash funds because writing checks for small amounts is impractical, costly, and time consuming. $ $ • Key Terms • petty cash fund • petty cash disbursement • petty cashier • petty cash voucher • petty cash requisition • petty cash register $

  3. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Establishing a Petty Cash Fund • Small, incidental cash payments are made from the petty cash fund. • To establish a petty cash fund, a business estimates the amount of cash needed in the fund for a certain period of time, usually a month. $ $ $

  4. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Journalizing the Establishment of the Petty Cash Fund $ Business Transaction On May 1, Check 2151 for $100 was issued to establish the petty cash fund. $ JOURNAL ENTRY $

  5. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Making Petty Cash Payments Whenever a cash payment is made, a petty cash voucher is completed. $ $ $

  6. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Replenishing the Petty Cash Fund $ • When the amount of cash in the petty cash box reaches the minimum amount, the petty cash fund is replenished. • Replenishing the petty cash fund restores the fund to its original cash balance. $ $

  7. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Reconciling the Petty Cash Fund • Add all the paid petty cash vouchers. • This total is then subtracted from the original cash balance of the petty cash fund. • The difference is the reconciled petty cash balance, or the amount of money that should be in the petty cash box. $ $ $ Original balance $100.00 Total of paid petty cash vouchers – 87.75 Reconciled petty cash balance $ 12.25

  8. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Preparing a Petty Cash Requisition Form $ • After the petty cash fund is reconciled, the petty cashier prepares a petty cash requisition. • A petty cash requisition is a form requesting money to replenish the petty cash fund. $ $

  9. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Using a Petty Cash Register • A supplemental record that summarizes the types of petty cash disbursements. • It is not an accounting journal because amounts from this register are not posted to general ledger accounts. $ $ $

  10. Section 2 The Petty Cash Fund (cont'd.) Chapter 22 $ Check Your Understanding $ How do you determine if a petty cash fund is short or over? $ $

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