Accounting Methods and Entries
The petty cash fund is identified in the general ledger books as Cash on Hand-Petty Cash Fund.
- The only accounting entry that appears on its GL page is the recognition of the fund’s set-up, i.e.
Dr. Cash on Hand – Petty Cash Fund xyz
Cr. Cash in Bank xyz
This involves the issuance of a check payable to the manager of the department or his designate and should bear an appropriate notation for its purpose. The accompanying journal voucher shall likewise contain the PCF custodian’s acknowledgment regarding the receipt of said funds.
- The accounting entry for fund replenishment is as follows:
Dr. Transportation Expenses xyz
Dr. Repairs and Maintenance - Cleaning Materials xyz
Dr. Postage and Other Mailing Expenses - xyz
Dr. Supplies Expense – Photocopying – xyz
Dr. Miscellaneous Expenses – xyz
Cr. Cash in Bank xyz
The cash received plus the remaining cash on hand brings back the PCF balance to its full amount.
- A cash overage is initially logged as a sundry expense until such time that the cause of the overage can be traced. If the discrepancy has not been resolved at month-end, the sundry amount shall reduce the most likely expenses that were incurred via the PCF. No accounting entry is required since the account classification shall be presented in the PCF summary report.
- A cash shortage discovered by the control officer or auditor shall be declared and initially logged as a receivable from the petty cash custodian. The settlement and the accounting entry shall be taken-up upon fund replenishment and presented in the summary report. The amount claimed as replenishment should not include the cash shortage, since the PCF custodian will settle the amount.
- Under no circumstance can a cash overage be used to offset a cash shortage.
The fund shall be processed for replenishment at the close of each year so that all expenses will be taken-up before the general ledger books are closed. This is regardless if the remaining cash on hand is still substantial.
Take note that the petty cash procedures above are integrated with internal control measures to maintain, monitor and record the fund’s disbursements and replenishment. These are basic procedures that can be modified to suit the purpose of the business organization. However, in formulating procedures, make sure that the internal controls are still in place, in order to prevent any manipulation or misuse of the fund.