Replenishing the Petty Cash Fund

At this point you need to top up the petty cash fund. You do this by writing a check for the exact amount of the total expenses; in the above example, $98.29. You cash this check and deposit the money into the box. Now you have the new $98.29 and the old $1.71, which once again totals $100.

Another way to think of the petty cash fund is that it will at any moment, between the receipts in the box and actual cash, total $100.

Now how do you record that check you just wrote? Well, you know the expenses that made up the $98.29. They are summarized on your petty cash control sheet. Our bookkeeping entry will be ­

            DR     Office supplies                       $63.12

            DR     Postage                                   26.10

            DR     Misc. expense                            2.95

            DR     GST paid                                   6.12

            CR     Bank                                                      $98.29

 

Notice that the petty cash amount on your balance sheet will never change. It will always stay at $100 unless you make it larger.

I can't stress enough the importance of following these procedures for petty cash. Dealing with low-dollar-value receipts can be annoying, but unless they are tracked and properly accounted for, they could total up to a substantial amount of expenses that you are not claiming for income tax purposes. That's like throwing money off the balcony!