LESSON 5-4

1. LESSON 5-4 Petty Cash Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. ESTABLISHING A PETTY CASH FUND • An amount of cash kept on hand and used for making small payments is called petty cash • A petty cash fund is used for small cash payments • The petty cash account is an asset with a normal debit balance • A check is written to open the petty cash fund, cashed, and the money put into a lock box located within the business LESSON 5-4

3. 2 3 ESTABLISHING A PETTY CASH FUND page 134 August 17. Paid cash to establish a petty cash fund, $100.00. Check No. 8. 1 4 1. Write the date. 2. Write the title of the account debited. Record the amount debited. 3. Write the title of the account credited. Record the amount credited. 4. Write the source document number in the Doc. No. column. LESSON 5-4

4. MAKING PAYMENTS FROM A PETTY CASH FUND WITH A PETTY CASH SLIP page 135 A form showing proof of a petty cash payment is called a petty cash slip • A petty cash slip shows the following information: • Petty cash slip number • Date of petty cash payment • To whom paid • Reason for the payment • Amount paid • Account in which amount is to be recorded • Signature of person approving the payment The petty cash slips are kept in the petty cash box until the fund is replenished LESSON 5-4

5. REPLENISHING PETTY CASH page 136 • As petty cash is paid out, the amount in the petty cash box decreases • Petty cash is always replenished at the end of each month so that all of the expenses are recorded in the month they are incurred • Before petty cash is replenished, a proof of the fund must be completed: Petty cash remaining in the petty cash fund $70.00 Plus total of petty cash slips +30.00 Equals petty cash fund $100.00 • The last line of the proof must show the same total as the original balance of the petty cash fund • If the petty cash does not prove, the errors must be found & corrected before any more work is done LESSON 5-4

6. Petty Cash Report • Errors may be made when making payments from a petty cash fund which causes a difference between actual cash on hand & the amount that should be on hand • A petty cash on hand amount that is less than a recorded amount is called cash short • A petty cash on hand amount that is more than a recorded amount is called cash over • Petty cash short and petty cash over are recorded in an account titled Cash Short and Over • Does not have a normal balance • Preparing a Petty Cash Report will assist you in determining the amount of cash over or short LESSON 5-4

7. 1 3 4 5 6 7 PETTY CASH REPORT page 248 1. Write the date and custodian name. 2. Write the fund total. 3. Summarize petty cash payments. 2 4. Calculate and write the total payments. 5. Calculate and write the recorded amount on hand. 8 6. Write the actual amount of cash on hand. 7. Subtract the actual amount on hand from the recorded amount on hand and write the amount. 8. Write the total of the replenish amount. LESSON 9-3

8. REPLENISHING A PETTY CASH FUND page 249 November 18. Paid cash to replenish the petty cash fund, $208.66: office supplies, $32.33; advertising, $50.00; miscellaneous, $128.50; cash over, $2.17. Check No. 310 1. Date 2. Account titles 3. Check number 4. Expense amounts 5. Cash short as a debit; cash over as a credit 4 5 6 6. Total cash payment 1 3 2 LESSON 9-3

9. TERMS REVIEW page 138 • petty cash • petty cash slip LESSON 5-4