Setting Up Petty Cash

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There is often a need to record money that is kept as Petty Cash. This money is kept separately in a petty cash tin and is topped up as required.

Recording the transaction

1. Create a GL account (Balance Sheet) for Petty Cash.
2. Journal transaction when the cheque is raised for the float is:

• Debit the Petty Cash $100
• Credit Bank $100

Each transaction is then paid from the float. A docket should be used to record each transaction taken from the float.

Reimbursing the Float

1. A cheque is raised for the total of all the dockets in the petty cash tin. This is done by creating a creditor called "Petty Cash".
2. The journal transaction to record these expenses will be:

• Debit Expense Accounts for each transaction
• Credit Bank

Note1: The petty cash float should always equal $100. This $100 is made up of dockets + any cash remaining.

Note2: The Balance Sheet account created to record the float never changes. It always remains at the float amount ($100). Details of payments made through petty cash are recorded under the creditor "Petty Cash".