What is the correct entry to replenish a petty cash fund?

by | Mar 14, 2023

how to replenish petty cash

Such disbursements are a common problem in petty cash, where there is a high risk of fraud. Also, since most petty cash custodians are not trained as accountants, they may incorrectly record disbursements. For these reasons, a petty cash reconciliation should be conducted https://www.kelleysbookkeeping.com/journal-entries-for-credit-card-transactions/ at regular intervals. The review can be treated as an audit, which means not warning the petty cash custodian of the arrival of the reviewer. This lack of warning is useful for detecting any personal withdrawals from the petty cash fund by the custodian.

One of the conveniences of the petty cash fund is that payments from the fund require no journal entries at the time of payment. Thus, using a petty cash fund avoids the need for making many entries for small amounts. Only when the fund is reimbursed, or when the end of the accounting period arrives, does the firm make an entry in the journal. The replenish will move the cash from other accounts to the petty cash account.

The check is cashed and the money is placed under the control of one designated individual. This ensures that one individual can be held responsible for all the cash in the fund. A petty cash fund is a small fund whose purpose is to make small disbursements of cash. Most businesses will reserve enough cash in their fund to meet their monthly needs.