INTACC1

3rd Meeting
12.01.2021

Petty Cash Fund-

- Is a company’s working cash fund established for purposes of paying small
expenses that cannot be paid conveniently through issuance of checks or
cheques.
- Under the responsibility of a cashier or custodian.
- A monthly report is prepared showing details of how the established fund was
expended.

Petty Cash Fund may be accounted for either under the following;
1. Imprest Fund System- is more commonly assumed even during practice.
Provides that all cash receipts must all be deposited and paid through issuance
of checks.
2. Fluctuating Fund System

The difference between the two:

1. Payment of petty expenses (always present)
2. Replenishment of the fund
3. Adjustment of the fund in case no replenishment
a. For 2 and 3, only one will occur.

IMPREST FUND SYSTEM FLUCTUATING FUND SYSTEM

Establishment of the Fund

Petty Cash Fund XXX
Petty Cash Fund XXX Cash/Cash in Bank XXX
Cash/Cash in Bank XXX

Payment of Petty Expenses

No Journal Entry Expenses XXX

(Preparation of Petty cash Voucher only) Petty Cash Fund XXX

Replenishment of the Fund

Expenses XXX Petty cash Fund XXX

Cash/Cash in Bank XXX Cash/Cash in Bank XXX
 Adjustment of the Fund in Case no
Replenishment

Expenses XXX No Journal Entry

Petty Cash Fund XXX (The Fund is automatically adjusted)

Increase in the Balance of Fund

Petty Cash Fund XXX Petty cash Fund XXX

Cash/Cash in Bank XXX Cash/Cash in Bank XXX

Decrease in the Balance of Fund

Cash/Cash in Bank XXX Cash/Cash in Bank XXX

Petty Cash Fund XXX Petty Cash Fund XXX

Sample Problems

Jan. 1- Set aside an amount of P20,000 cash to set up a petty cash fund. (issuance of
checks)- establishment of the fund

Petty Cash Fund 20,000

Cash/Cash in Bank 20,000

Petty Cash Fund 20,000

Cash/Cash in Bank 20,000

Jan. 15- Incurred and paid P1,500 for postages and P2,000 for telephone bills
- Payment of postages and telephone bills.

No journal entry (preparation of petty cash voucher only)

Postages 1,500
Telephone Bills 2,000
Petty Cash Fund 3,500
Jan. 31-Issued check of P3,500 to replenish the fund.
replenishment of the fund
Postages 1,500
Telephone Bills 2,000
Cash/Cash in Bank 3,500

Petty Cash Fund 3,500

Cash/Cash in Bank 3,500

Feb. 14- Incurred and paid P1,400 for water bills and P1,700 for electric bills.
Payment of water bills and Electric bills

No journal entry (Preparation of petty cash voucher only)

Water Bills 1,400

Electric Bills 1,700
Petty Cash Fund 3,100

Feb.28- Increased the fund by P5,000. The fund was not replenished for the expenses
paid on February 14.
Increase in the balance of the Fund

Petty Cash Fund 5,000

Cash/Cash in Bank 5,000

Petty Cash Fund 5,000

Cash/Cash in Bank 5,000

Adjustment of the fund due to non-replenishment

Water Bills 1,400
Electric Bills 1,700
Petty Cash Fund 3,100

No journal Entry (The fund is automatically adjusted)

Mar. 10- Incurred and paid P1,900 for office supplies and P3,000 for internet bills
Payment of office supplies and internet bills

No journal Entry (preparation of petty cash vouchers)

Office Supplies 1,900

 Internet Bills 3,000
Petty cash Funds 4,900

Mar. 15- Decreased the fund by P5,000

Decrease in the balance of fund

Cash/Cash in Bank 5,000

Petty cash Fund 5,000

No journal entry (the fund was automatically adjusted)

Mar. 31- The fund was not replenished

Adjustment of the fund due to non-replenishment

Office Supplies 1,900

Internet Bills 3,000
Petty Cash Fund 4,900

No journal entry (the fund is automatically adjusted)

ACTUAL BALANCE OF THE FUND AS OF MARCH 31, 2019

Petty Cash Fund- 12,000=12,000

● Accounting for petty cash funds may involve uncovering or recognizing

“shortages” or ‘overages”.
● Shortages or overages are charged to a temporary account: “cash short or over”.
○ Rules when to debit or credit
■ Cash short or over account is debited if there is a shortage.
■ Cash short or over account is credited if there is an overage.

Petty Cash shortage or overage is computed as follows:

PCF Accountabilities XXX

PCF accounted for XXX
Shortage or overage xxx

Where;
 ● “Accountabilities” is the balance of the established fund. Responsibility of the
cashier.
○ (Shortage if Accountabilities greater than Accounted for)
● Accounted for is the count for coins & bills remaining, unreplenished expense
vouchers, and employee IOUs (I OWE YOU’s) (utang ng employee), if any.
○ (Overage if Accounted for is less than Accountabilities)

If Accountabilities=Accounted for, there is no shortage or overage.

Summary Journal Entries in Relation to Petty Cash Shortage or Overage

TO RECORD IF THERE IS A TO RECORD IF THERE IS AN
SHORTAGE OVERAGE

Expenses xxx Expenses xxx

Advances to Employees (if any) xxx Advances to employees (if any) xxx
Cash Short or Over xxx Cash/Cash in Bank xxx
Cash/Cash in Bank xxx Cash Short or Over xxx

REASON IS UNKNOWN AND NOT APPLICABLE

SHORTAGE IS MATERIAL

Loss From (Cash Shortage) xxx ooo

Cash Short or Over xxx

REASON IS UNKNOWN AND REASON FOR THE OVERAGE IS

SHORTAGE IS IMMATERIAL UNKNOWN

Misc./Other Expense xxx Cash short or Over xxx

Cash Short or Over xxx Misc./Other Income xxx

REASON IS DUE TO THE REASON IS DUE TO THE

RESPONSIBILITY OF THE CASHIER RESPONSIBILITY OF THE CASHIER

Receivable from Cashier xxx Cash Short or Over xxx

Cash short or Over xxx Payable to Cashier xxx

The petty Cash accountabilities is the balance of the fund of 15,000

Currency coins and bills 6,900
Add: Expense Vouchers 6,000
Add: Employee IOUs 1,100
Petty Cash Accounted for 14,000

Petty cash accountabilities 15,000

Less: Petty cash accounted for (14,000)
Petty Cash Shortage 1,000

Currency coins and bills, remaining 6,900

Add: Replenishment amount (15,000-6,900) 8,100
Adjusted petty fund balance 15,000

● Since the fund was replenished, the balance with go back to P15,000 and to do
that a total of P8,100 (6,000 expense vouchers + 1,100 employee IOUs + 1,000
cash shortage) replenishment amount must be made through check issuance.

TO RECORD IF THERE IS A ASSUMING THERE IS AN OVERAGE

SHORTAGE

Expenses 6,000 Expenses 6,000

Advances to Employees 1,100 Advances to Employees 1,100
Cash Short or Over 1,000 Cash/Cash in Bank 7,100
Cash/Cash in Bank 8,100 Cash Short or Over 1,000

REASON IS UNKNOWN AND NOT APPLICABLE

SHORTAGE IS MATERIAL

Loss From Cash Shortage 1,000 oOo

Cash Short or Over 1,000

REASON IS UNKNOWN AND REASON FOR THE OVERAGE IS

SHORTAGE IS IMMATERIAL UNKNOWN

Misc./Other Expense 1,000 Cash Short or Over 1,000

Cash Short or Over 1,000 Misc./Other income 1,000

REASON IS DUE TO THE REASON IS DUE TO THE

RESPONSIBILITY OF THE CASHIER RESPONSIBILITY OF THE CASHIER

Receivable from cashier 1,000 Cash Short or Over 1,000

Cash Short or Over 1,000 Payable to Cashier 1,000
Review from past discussion:
● How do we classify cash funds in the presentation of FS.

In accounting, Cash funds;

Cash and cash Other Short term Other long term
Equivalents Investments investments

If set aside primarily for Such as those set aside Such as those set aside
current business for payment of long-term for payment of long-term
purposes and short-term liabilities that are due liabilities that are not yet
cash commitments. within one year from the due beyond one year
reporting date. from reporting date.
“Working funds”
Example: Long term asset fund
Example: Current portions of: - Land Acquisition
● Cash fund ● Sinking fund fund
● Mortgage fund Non current portion of:
● Redemption fund ● Sinking Fund
● Insurance fund ● Mortgage fund
● Redemption fund
● Insurance Fund