Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking account in order to have the cash on hand equal to the amount reported in the general ledger account, Petty Cash.

Let’s assume that Company X has a petty cash fund of $100 and Mary is the company’s employee responsible for handling the petty cash transactions. At all times Mary should have $100 in some combination of cash and petty cash vouchers (receipts). Let’s assume that Mary has $20.00 in cash and she has petty cash vouchers of $79.70. She knows that $20.00 is too little cash to have on hand. As a result she will request that a check be written from the company’s regular checking account in the amount of $80 ($100.00 that is reported in the Petty Cash account minus the $20.00 that is actually on hand.) The replenishment means the cash in the custodian’s possession will be returned to $100, even if the vouchers do not equal the amount needed ($80 in this example). The small difference will be expensed along with the amounts shown in the vouchers.

It is important to point out that the $80 check will be credited to Cash (the company’s checking account). No entry will be made to the Petty Cash account.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years. He is the creator and author of all the content found on AccountingCoach.com. You can read 1,500 testimonials praising his ability to explain accounting in a way that anybody can understand.

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