Replenish Petty Cash Journal Entry

Company petty cash is a small amount of cash kept on hand by a business for the purpose of making small purchases. The cash is typically kept in a locked box or drawer, and only a designated employee, usually the office manager or bookkeeper, has the key.

Petty cash is used for buying supplies, postage, snacks for employees, and other small business expenses. When petty cash is expended, the employee must provide a receipt and explain the purpose of the purchase. The petty cash is then replenished with an equal amount of cash. Petty cash can be a convenient way for businesses to handle small expenses, but it is important to keep track of all expenditures to avoid overspending.

Company petty cash can be a great boon to businesses, large and small. Petty cash is a designated sum of money that is kept on hand for small, everyday expenses that may come up. Having petty cash on hand eliminates the need to constantly write cheques or use company credit cards for these small purchases. It also helps to streamline the accounting process, as all expenses are recorded in one place. Additionally, it can help to build goodwill with vendors when they see that the company is prepared to do business with them on a regular basis. All in all, company petty cash can be a helpful tool for keeping businesses running smoothly.

Using company petty cash can be a risky proposition. First of all, there is always the potential for theft or misappropriation of funds. If the petty cash is not properly secured, it could be easy for someone with ill intentions to take the money. Additionally, there is the possibility of poor record-keeping. If receipts are not properly tracked and filed, it can be difficult to account for all of the expenses. This can lead to problems down the road, especially if an audit is conducted.

Finally, using petty cash can also create a sense of entitlement among employees. If they are used to having access to extra funds for small purchases, they may begin to expect it as a regular perk of the job. For these reasons, it is important to weigh the risks and benefits of using company petty cash before making a decision.

Journal Entry to Replenish Petty Cash

The petty cash is used to pay for the small expenses that suppliers do not allow to purchase on credit. The company will use petty cash and it will keep decreasing to a low level. The company needs to replenish the petty cash so that it will increase to a maximum level.

The replenish will move the cash from other accounts to the petty cash account. At the same time, it records the amount of petty cash that is used to pay for small expenses. There are two transactions that happen at the same time.

The first journal entry is debiting expense (small expense) and credit petty cash.

Account	Debit	Credit
Expense	000
Petty Cash		000

The second journal entry is debiting petty cash and credit cash on hand (any cash account).

Account	Debit	Credit
Petty Cash	000
Cash on Hand		000

Sometimes, the company decides to combine the transactions above without touching the petty cash account. The transaction will end up impacting the expense account and cash-on-hand account.

Example

Company ABC has a petty cash balance of $ 500. The staff has used petty cash to pay for the taxi $ 100, office supplies $ 200, and other expenses $ 100. The remaining balance is only $ 100, so it requires replenishing from the cash on hand accounts. Please prepare a journal entry for petty cash replenishment.

Company ABC uses the petty cash for the expense amount $ 400 and the remaining balance is only $ 100. It requires replenishment to refill the petty cash balance.

Company needs to record expenses on the income statement and increase the petty cash balance to $ 500.

We have two options to record the replenishment.

Option 1

For the first option, we separate the transaction into two.

The journal entry is debiting expense $ 400 and credit petty cash $ 400.

Account	Debit	Credit
Travel Expense	100
Office Supplies	200
Others Expense	100
Petty Cash		400

The second journal entry is debiting petty cash $ 400 and credit cash on hand $ 400.

Account	Debit	Credit
Petty cash	400
Cash on Hand		400

Option 2

For the second option, we combine the two transactions above. We only record expense and cash on hand.

The journal entry is debiting expense $ 400 and credit cash on hand $ 400.

Account	Debit	Credit
Travel Expense	100
Office Supplies	200
Others Expense	100
Cash on Hand		400