Petty Cash Replenishment

Petty cash replenishment refers to the process of restoring the cash balance in the petty cash fund back to its original imprest amount.

Suppose for example a business maintains a petty cash fund of 300. At the end of an accounting period a count of the petty cash shows that the fund contains cash of 240 and expense vouchers for supplies of 40 and postage of 20.

The total petty cash expenditure is 60 (supplies 40 + postage 20). To replenish the fund the expense vouchers need to be replaced by cash of 60, bringing the total cash in the fund back to its original 300 (240 + 60).

How to Record the Petty Cash Replenishment

The accounting records will show the following bookkeeping entries when the business withdraws cash to replenish the petty cash fund.

Petty Cash Replenishment Journal Entry
Account Debit Credit
Supplies expense 40
Postage expense 20
Cash 60
Total 60 60

It should be noted that there is no entry made to the petty cash fund. With an imprest system the balance on the fund (cash + vouchers) is always constant (300). The cash added to the fund simply replaces the expense vouchers.

Petty Cash Replenishment Bookkeeping Entries Explained

Debit: Supplies and postage are recorded as expenses of the business.

Credit: Cash went out of the business to pay the expenses.

The Accounting Equation

The accounting equation, Assets = Liabilities + Equity means that the total assets of the business are always equal to the total liabilities plus the equity of the business. This is true at any time and applies to each transaction.

For this transaction the accounting equation is shown in the following table.

Petty Cash Replenishment Accounting Equation
Assets = Liabilities + Equity
Cash = None + Retained earnings
– 60 = 0 + – 60

In this case an asset (cash) decreases representing money paid out by the business for cash expenses; this decrease is balanced by a corresponding decrease in equity (retained earnings) on the other side of the accounting equation.

It should be noted that the debit to the income statement for the expenses, reduces the net income which reduces the retained earnings and therefore the equity in the business.

Popular mdct.ru Examples

This petty cash replenishment journal entry is one of many bookkeeping entries used in accounting, discover another at the links below.

Petty Cash Replenishment September 28th, 2017Team

You May Also Like


Related pages


variable cost per unit formulaformula for diminishing value depreciationvouchers templateclosing income summary to retained earningssample excel balance sheetreceivable turnover days formulacapital gearing ratio meaningaccounting journalizingthe basic accounting equation cannot be restated asdepreciation deferred tax liabilityprofit sharing ratio formulatrade payable daysbeginning finished goods inventoryaccounting entries for accruals and prepaymentsturnaround ratiocash receiptingcorrecting entries in accountingaccrued expenses and deferred incomeinterest receivable entryadjusting prepaid insurancebookkeeping assessment testwip accountsequation rearranger onlinebank overdraft asset or liabilitynpv annuity formulasecurity coverage ratio formulaformula for arrjournal entries of depreciationbank reconcilation statement formatinvoiced definitionbank recocalculate the payback period for each projectlease amortization schedule templatenominal annual rate of return calculatorpv formulaspetty cash vouchermarketable securities on cash flow statementdouble-entry accounting transactions must alwayscapitalized lease vs operating leasefixed asset turnover interpretationabbreviated accounts templatecontra revenueperpetuity formula with growthpetty cash fund definitionannuity timelinepayback method examplecontribution margin ratio formulawarranty expense on income statementdefine drawings in accountingcost of goods manufactured templatefv of annuity formulaexamples of goodwill in accountingbalance sheet debit creditcapital asset gearing ratiohow is markup calculateddebtors days calculation formulajournal entry for sale of inventoryeconomic entity conceptjob timesheetfinancial accounting formulas cheat sheettraditional costing formulahow to prepare a vertical analysissales invoice double entrydebit and credit in balance sheethow to calculate effective annual ratereceivables days formularoe formulasexamples of accounts payablenet realizable value equationexamples of marketable securitiesjournal entry template excel