馃攳
6 - A Petty Cash System - YouTube
Channel: unknown
[5]
I'm Larry Walther and this is principles
[8]
of accounting dot-com chapter six in
[11]
this particular
[12]
the correct offer
[14]
system will be considered a petty cash
[18]
system some people call it an impressed
[20]
fund is a fund established for making
[23]
small payments that are impractical to
[25]
pay by cheque for example perhaps some
[27]
postage due
[29]
reimbursement to an employee for a small
[31]
purchase of office supplies things of
[33]
this nature might be funded out of a
[34]
petty cash fund a petty cash fund is
[38]
established by making a check out to
[40]
cash
[40]
taking that check to the bank cashing it
[43]
and then taking the money and placing
[45]
that in a petty cash box under the
[47]
control of a particular petty cash
[48]
custodian now when a petty cash fund is
[52]
initially established it's done so by
[55]
crediting cash here's the thousand
[57]
dollar credit to cash and we debit petty
[59]
cash these are both cash accounts on the
[61]
general ledger it's just that the petty
[63]
cash account now reflects a subdivision
[65]
of cash into a second account a petty
[69]
cash fund custodian safeguards of the
[71]
funds and makes disbursements out of the
[73]
fund in the process of establishing a
[76]
petty cash fund it's important to also
[77]
establish policies regarding the
[79]
appropriate types of expenditures that
[81]
can be made from the fund and the
[83]
process by which receipts are maintained
[85]
setting forth the nature of those
[87]
expenditures the receipt should be
[89]
placed in the petty cash fund as
[92]
disbursements are made out of the fund
[93]
at any point in time therefore the
[95]
receipts and the funds plus remaining
[97]
cash in the petty cash fund should equal
[99]
the total amount of the fund next let's
[101]
turn our attention to the replenishment
[103]
of the petty cash fund whenever a fund
[106]
needs to be replenished another check is
[108]
made out to cash that's taken to the
[110]
bank in cash the amount of that check is
[112]
the amount that's necessary to bring the
[114]
fund back up to its own original level
[116]
so that should also corresponding to the
[118]
receipts that are in the box so the
[120]
receipts are removed and they would be
[122]
formally recorded as expenses so here
[124]
I'm assuming we needed to replenish the
[126]
petty cash fund six hundred and fifteen
[128]
dollars
[129]
there's our credit to cash that's the
[131]
cheque we write out and take to the bank
[132]
to get six hundred and fifteen dollars
[134]
that money is placed into the fund the
[136]
receipts are taken out for supplies fuel
[139]
and miscellaneous cost in this case and
[141]
those expense accounts are appropriately
[143]
debited at that time that brings the
[145]
petty cash fund back up to a thousand
[147]
dollars
[148]
and it reflects that the 615 dollars
[150]
that was spent to remove from the box
[151]
has now been appropriately recorded in
[154]
the correct expense account
[155]
notice that the petty cash account
[158]
itself is not impacted it still carries
[160]
a one thousand dollar balance the petty
[163]
cash fund was initially debited for a
[165]
thousand dollars and it's not changing
[167]
this is a credit to cash not a credit to
[169]
petty cash so to review we have a six
[172]
hundred and fifteen dollar cheque taken
[174]
to the bank the money is taken placed
[176]
into the petty cash box and the receipts
[178]
are taken out and recorded in the
[180]
accounting records that journal entry
[182]
was credit cash 6:15 and debit the
[186]
various expense accounts for a total of
[188]
615 sometimes the petty cash fund or any
[191]
other cash account a cash register for
[193]
example may be short or over small
[195]
errors can occur errors may cause the
[198]
petty cash fund to be out of balance
[199]
there can also be math errors in making
[202]
change failure to provide a receipt for
[204]
an appropriate expenditure and so on
[206]
nevertheless the available cash in the
[208]
Box needs to be brought up to the $1000
[210]
or the appropriate level so we need to
[212]
establish an account for cash shorter
[214]
over debit is a bad thing in this case
[216]
it reflects the cash shortage a credit
[219]
would reflect them excess amount of cash
[220]
beyond the expected amount the cash
[223]
shorter over would be an income
[224]
statement adjustment it's probably not
[226]
material hopefully but it would be a
[228]
miscellaneous expense or a type of
[229]
adjustment it's not just for petty cash
[232]
discrepancies but any cash short or over
[235]
situation so here's a journal entry in
[237]
this case I actually needed to record
[239]
six hundred and thirty-five dollars
[241]
credit to cash I recorded the same six
[243]
hundred and fifteen dollars of expenses
[245]
I just can't explain the twenty dollar
[247]
shortage so now I'm debiting and other
[249]
expense accounts cash short in this case
[251]
to reflect if it had been a cash overage
[253]
we would have had a credit there and now
[255]
the last thing I would like to consider
[257]
as we discuss petty cash is the base
[259]
fund it might from time to time be
[261]
desirable to change the amount in the
[263]
petty cash fund the base size the petty
[265]
cash fund may need to be increased as
[267]
the company grows so the journal entry
[269]
to increase the fund is identical to the
[271]
entry that was Illustrated to establish
[273]
the fund that is will
[274]
debit petty cash and credit cash so if
[277]
we were to add $500 to the petty cash
[279]
fund we would debit petty cash 500 more
[282]
and credit cash 500 that would be an
[284]
increase in the base amount of the fund
[286]
not a reimbursement in the fund
[288]
otherwise the only time we would need to
[290]
make an entry to the petty cash account
[291]
occurs when the fund is initially
[293]
established
Most Recent Videos:
You can go back to the homepage right here: Homepage