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
CENTURY 21 ACCOUNTING © Thomson/South-Western
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
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 5-4
3
ESTABLISHING A PETTY CASH FUND
page 134
August 17. Paid cash to establish a petty cash fund, $100.00.
Check No. 8.
2
1
4
3
1.
2.
3.
4.
Write the date.
Write the title of the account debited. Record the amount debited.
Write the title of the account credited. Record the amount credited.
Write the source document number in the Doc. No. column.
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 5-4
4
MAKING PAYMENTS FROM A PETTY CASH
page 135
FUND WITH A PETTY CASH SLIP
A form showing proof of a petty
A petty cash slip shows the
cash payment is called a petty cash
following information:
slip
Petty cash slip number
Date of petty cash
payment
To whom paid
Reason for the payment
Amount paid
Account in which amount
The petty cash slips are kept
is to be recorded
in the petty cash box until the
Signature of person
fund is replenished
approving the payment
CENTURY 21 ACCOUNTING © Thomson/South-Western
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
CENTURY 21 ACCOUNTING © Thomson/South-Western
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
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 5-4
7
PETTY CASH REPORT
1. Write the date and
1
custodian name.
2. Write the fund total.
3. Summarize petty cash
payments.
4. Calculate and write the
3
total payments.
5. Calculate and write the
recorded amount on
hand.
5
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.
CENTURY 21 ACCOUNTING © Thomson/South-Western
page 248
2
4
6
7
8
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.
2.
3.
4.
5.
4
5
6
Date
Account titles
Check number
Expense amounts
Cash short as a debit;
cash over as a credit
6. Total cash payment
1
2
3
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 9-3
9
TERMS REVIEW
page 138
 petty cash
 petty cash slip
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 5-4