Definition of Replenishing Petty Cash
Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking account in an amount that will return the cash on hand to the amount shown in the general ledger account Petty Cash.
Example of Replenishing Petty Cash
Let’s assume that a company has a petty cash fund of $100 and its general ledger account Petty Cash has a debit balance of $100. Mary is the petty cash custodian who is the only person handling the petty cash transactions. At all times Mary should have some combination of cash and petty cash vouchers (receipts) that are equal to $100.
Next, let’s assume that there is only $20.00 in cash remaining and Mary realizes that $20 is not sufficient. She needs to obtain a company check for $80 in order to cash it and return the cash amount to $100 (the amount shown in the Petty Cash account). The petty cash vouchers provide the documentation for the $80 check request. In the process Mary discovers that the vouchers add up to only $79. Mary will debit the accounts indicated on the petty cash vouchers and then debit Cash Short and Over for $1 (the amount that is not accounted for).
It is important to realize that the $80 check will be credited to Cash (the company’s checking account). There is no entry to the Petty Cash account when merely replenishing the petty cash.
