Some businesses keep cash on hand
to make change for customers.
Businesses may use petty cash funds
because writing checks for small
amounts is impractical, costly, and
time consuming.
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Record the entry to establish a change fund.
Prove the cash in the cash drawer each business day.
Open and replenish a petty cash fund.
Journalize opening a petty cash fund.
Prepare a petty cash requisition to replenish the petty cash fund.
Use a petty cash register to record petty cash disbursements.
Journalize replenishing a petty cash fund.
Determine whether cash is short or over, and record the shortage
or overage.
Glencoe Accounting
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Section 22.1
The Change Fund
Key Term
change fund
Glencoe Accounting
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Establishing a Change Fund
Section 22.1
The Change Fund
The Change Fund
Established by writing
a check
Debited for the check
amount and the Cash in
Bank account is credited
for the check amount
change fund
An amount of money, consisting of
varying denominations of bills and coins, that is
used to make change in cash transactions.
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Establishing a Change Fund
Section 22.1
The Change Fund
Business Transaction
On May 1 the
accountant for The
Starting Line wrote
Check 2150 for
$100 to establish a
change fund.
See pages 645–646
Glencoe Accounting
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Recording Cash
Short and Over
Section 22.1
The Petty Cash Fund
See page 647
Glencoe Accounting
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Using the Change Fund
Section 22.1
The Change Fund
The amount of cash in
the change fund is put
in the register drawer
at the beginning of
the day.
Glencoe Accounting
Cash sales that occur
throughout the day are
recorded on the
register tape.
At the end of the day,
the amount in the cash
drawer minus the cash
fund amount should
equal the total sales
shown on the cash
register tape.
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Recording Cash
Short and Over
Section 22.1
Glencoe Accounting
The Change Fund
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
Recording Cash
Short and Over
Section 22.1
The Change Fund
Business Transaction
On May 2 the cash register
tape shows that cash sales
are $520 and sales taxes
are $26, for a total of $546.
The actual cash in the cash
register drawer, after
subtracting the amount of
the change fund, is $545.
See page 648
Glencoe Accounting
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Demonstration Problems 1-4
Glencoe Accounting
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Section 22.2
The Petty Cash Fund
Key Terms
petty cash fund
petty cash disbursement
petty cashier
petty cash voucher
petty cash requisition
petty cash register
Glencoe Accounting
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Establishing the
Petty Cash Fund
Section 22.2
The Petty Cash Fund
When setting up a petty cash fund,
each business determines the
maximum amount that will be paid out
by a petty cash disbursement.
petty cash fund
Cash kept on hand for making
small, incidental cash payments.
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petty cash disbursement
Any payment made from the
petty cash fund.
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Establishing the
Petty Cash Fund
Section 22.2
The Petty Cash Fund
What Is a
Petty Cashier?
petty cashier
The person responsible for maintaining the
petty cash fund and for making petty cash
disbursements.
Glencoe Accounting
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Establishing the
Petty Cash Fund
Section 22.2
The Petty Cash Fund
Business Transaction
On May 1 Check
2151 for $100 was
issued to establish
the petty cash fund.
See pages 650–651
Glencoe Accounting
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Information on the Petty Cash Voucher
Date of the payment
Person or business to whom the payment is made
Amount of the payment
petty cash voucher
A form that provides
proof of payment from
the petty cash fund.
Reason for the payment
Account to be debited
Signature of the person approving the payment
The signature of the person receiving the payment
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Replenishing the Petty Cash Fund
Replenishing the petty cash fund restores the fund
to its original cash balance.
This requires reconciling the cash balance in the
fund and preparing a petty cash requisition form.
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Reconciling the Petty Cash Fund
The total from the cash vouchers is subtracted from
the original cash balance.
The difference is the reconciled
petty cash balance.
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Petty Cash Requisition Form
petty cash requisition
A form requesting
money to replenish
the petty cash fund.
See page 653
Glencoe Accounting
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Not all businesses that have a petty cash fund use a
petty cash register.
petty cash register
A record of all disbursements made from the
petty cash fund.
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
See page 654
Glencoe Accounting
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Petty cash envelopes are used to
record petty cash disbursements.
Each envelope has a form printed on
the front of it to record disbursements.
Glencoe Accounting
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Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Journalizing the Check to Replenish the
Petty Cash Fund
Business Transaction
On May 31 Check 2341 is written to replenish the petty cash fund.
See page 655–656
Glencoe Accounting
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Handling Cash Short and Over
in the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Recording a Cash Shortage in the Petty Cash Register
See page 657
Glencoe Accounting
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Question 1
On March 1 Ed’s Hardware established a change fund for $200. What steps do
you need to take to record the journal entry for this transaction?
Step 1: Identify the accounts affected.
The accounts Change Fund and Cash in Bank are
affected.
Step 2: Classify the accounts affected.
Change Fund and Cash in Bank are asset
accounts.
Step 3: Determine the amount of increase or decrease for
each account affected.
Change Fund is increased by $200. Cash in Bank
is decreased by $200.
(continued)
Glencoe Accounting
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Question 1
On March 1 Ed’s Hardware established a change fund for $200. What steps do
you need to take to record the journal entry for this transaction?
Step 4: Which account is debited? For what amount?
Increases to asset accounts are recorded as debits.
Debit Change Fund for $200.
Step 5: Which account is credited? For what amount?
Decreases to asset accounts are recorded as
credits. Credit Cash in Bank for $200.
Glencoe Accounting
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Question 2
If the petty cash fund does not balance, what account is affected to
indicate the error?
You would debit Cash Short & Over in the event of a shortage or
credit the same account in the event of an overage.
Glencoe Accounting
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Demonstration Problems 5-6
Glencoe Accounting
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