1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 5-4 Petty Cash

2. CENTURY 21 ACCOUNTING © Thomson/South-Western What is Petty Cash? A petty cash fund is physical cash that a company sets aside and keeps on hand for small purchases such as buying postage stamps, office supplies, etc. When a company decides on the amount to keep in the petty cash fund, a journal entry needs to be made to “open” the petty cash fund. Every time petty cash is used to make a small purchase, a receipt is placed in the petty cash box as a record. At the end of the month, the dollar amount in the petty cash box MUST be brought back up (replenished) to the amount when originally opened. 2 LESSON 5-4

3. CENTURY 21 ACCOUNTING © Thomson/South-Western ESTABLISHING A PETTY CASH FUND 1.Which accounts are affected? Petty Cash Cash 2.How is each account classified? Petty Cash is an asset account. Cash is an asset account. Cash Petty Cash Debit Normal Balance Debit Normal Balance  200.00  Lesson 6-4, page 141

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 5-4 1.Write the date. ESTABLISHING A PETTY CASH FUND page 134 August 17. Paid cash to establish a petty cash fund, $100.00. Check No. 8. 2.Write the title of the account debited. Record the amount debited. 3.Write the title of the account credited. Record the amount credited. 4.Write the source document number in the Doc. No. column. 14 2 3

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 5-4 MAKING PAYMENTS FROM A PETTY CASH FUND WITH A PETTY CASH SLIP page 135

6. CENTURY 21 ACCOUNTING © Thomson/South-Western Replenishing Petty Cash As petty is used to purchase small items, it eventually will run out of funds. The petty cash account is replenished at the end of each month At this time all expenses that were paid with petty cash must be journalized

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 5-4 1.Write the date. REPLENISHING PETTY CASH page 136 14 August 31. Paid cash to replenish the petty cash fund, $30.00: miscellaneous expense, $20.00; advertising, $10.00. Check No. 12. 4.Write the source document number in the Doc. No. column. 3.Write the title of the account credited. Record the credit amount. 2.Write the title of the first account debited. Write the debit amount. Write the title of the second account. Record the debit amount. 2 3

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 5-4