It’s “other revenue” for you, not a normal source of revenue like your paycheck. The check is cashed and the money is placed under cash short and over journal entry the control of one designated individual. This ensures that one individual can be held responsible for all the cash in the fund.
If you are reimbursed $20 for postage expenses, debit postage expense $20 and credit cash $20. In a simple system, all petty cash expenditures are documented as they happen. The total of these costs is added to the petty cash account monthly, and the monthly amount is entered into the General Ledger as an expense. The entry to record the reimbursement would debit the expense accounts reported by the custodian. On the DV, use payment reason “K” payble to the custodian of the petty cash account using vendor type Petty Cash Custodian. Petty cash/cash drawer fund controls and procedures ensure that petty cash/cash drawer funds are properly established, maintained, and that the university’s assets are adequately safeguarded.
A petty cash fund is a small fund whose purpose is to make small disbursements of cash. In KFS, a distinction is made between Petty Cash accounts and Cash in Drawer accounts. Prior to KFS, both petty cash and cash in drawer were considered petty cash. Petty Cash funds may be established for payment of minor or infrequent expenses where it is otherwise impractical to obtain a university check or use a procurement card. To maintain internal controls, managers can use a petty cash receipt (Figure 3.7), which tracks the use of the cash and requires a signature from the manager. In this case, when we replenish the petty cash, we just need to refill $77 ($100 – $23) as we still have $23 remaining in petty cash.
The accounting system will show $95 in posted sales but $96 of collected cash. The journal entry for this sale would debit cash for $96, credit sales for $95, and credit cash over short for $1. Credit, or decrease, your cash account https://www.bookstime.com/ by the amount by which you must replenish the petty cash account in the journal entry. As with cash short situations, businesses should keep an eye on cash over situations in order to accurate accounting or other mistakes.
Your petty cash records might be inaccurate due to employee theft or accounting errors. As your business grows, you may need to re-evaluate the amount you keep in your petty cash fund. Throughout the month, several payments are made from the petty cash account of the Galaxy’s Best Yogurt. Therefore, the balance of cash short and over is on debit or credit depends on whether it is shortage or overage.
For example, the Galaxy’s Best Yogurt maintains a petty cash box with a stated balance of $75 at all times. Upon review of the box, the balance is counted in the following way. The cash over and short is recorded on debit when there is a shortage. In contrast, the cash over and short is recorded on credit when there is overage. Alternatively, if there had been too much cash in the petty cash box (a rare condition indeed!), the entry would be reversed, with a debit to cash and a credit to the cash over and short account. A cashier working at a clothing store conducted a transaction in which the customer overpaid.