CHAPTER TWENTY FIVE
PETTY CASH AND
OTHER SPECIAL
CASH
PROCEDURES
25-3
PETTY CASH AND OTHER SPECIAL
CASH PROCEDURES
Objectives:
1. Set up and use a petty cash fund.
2. Prove and replenish a petty cash fund.
3. Use a change fund and provide travel
advances.
4. Account for cash shortages and cash
overages.
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Setting Up the Petty Cash Fund
The size of the petty cash fund is
determined by the needs of each
business. To establish a petty cash
fund, a new asset account called
Petty Cash is debited. Cash is
credited.
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Using the Petty Cash Fund
To obtain a payment from the fund, it
is necessary to fill out a form called
a petty cash voucher. This form is
prepared in ink or typewritten. A
receipt should be included with the
voucher for payment.
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Proving the Petty Cash Fund
The total of the cash left in the
fund and the vouchers should
equal the beginning balance of the
fund.
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Replenishing the Petty Cash Fund
First, prove the petty cash fund.
Cancel all vouches by marking
them PAID.
Prepare replenishment journal
entry.
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Replenishing the Petty Cash Fund
(continued)
The journal entry is a debit to the
accounts listed on the vouchers.
The credit is Cash.
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Other Cash Funds
Some businesses have other cash
funds in the place of business.
There may be a change fund or a
fund for travel expenses. They all
operate the same way.
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Cash Shortages and Overages
As the funds are proven from the cash
accounts, businesses may discover a
shortage or overage. Usually the
amounts are within cents or dollars of
the beginning balances.
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Cash Shortages and Overages
(continued)
This account provides an avenue for
accounting for the differences. If the
differences are severe the
management of cash for the
business should be examined.
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Accounting Terminology
•Cash over
•Petty cash voucher
•Cash short
•Proving petty cash
•Change fund
•Replenishing petty cash
•Petty Cash Fund •Travel advances
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Chapter Summary
• The petty cash fund is used for small
cash payments. A petty cash
voucher must be prepared to explain
each payment.
• When the petty cash fund is set up,
an asset account called Petty Cash is
debited.
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Chapter Summary (continued)
•The Petty Cash fund is replenished at
the end of each month and at any
other time when the money is low. A
check is issued for the total amount
spent.
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25-15
Chapter Summary (continued)
• The petty cash fund is one
common type of fund. Other
funds a business may use
include change funds or travel
funds.
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Chapter Summary (continued)
• All cash funds should be proved
often. It is also necessary to prove
the cash receipts in a cash register.
• Cash shortages and overages must
be recorded. The Cash Short or
Over account is used for this
purpose.
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25-17
Investigating on the Internet
As a research assignment, find the
Wachovia® web site and report sources
of information that might concern
handling of cash.
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Topic Quiz
Answer the following true/false questions:
1. The petty cash fund is used for small
cash payments.
TRUE
2. Cash funds should be proven at the end
of each month within the fiscal period.
FALSE
3. Other cash funds that businesses use
include change funds and travel funds.
TRUE
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2. Cash funds should be proven at the end
of each month within the fiscal period.
FALSE
Cash funds should be proven daily, at
the minimum.
(Return to Topic Quiz)
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