Petty cash replenishment refers to the process of restoring the cash balance in the petty cash fund back to its original imprest amount.
Suppose for example a business maintains a petty cash fund of 300. At the end of an accounting period a count of the petty cash shows that the fund contains cash of 240 and expense vouchers for supplies of 40 and postage of 20.
The total petty cash expenditure is 60 (supplies 40 + postage 20). To replenish the fund the expense vouchers need to be replaced by cash of 60, bringing the total cash in the fund back to its original 300 (240 + 60).
How to Record the Petty Cash Replenishment
The accounting records will show the following bookkeeping entries when the business withdraws cash to replenish the petty cash fund.
It should be noted that there is no entry made to the petty cash fund. With an imprest system the balance on the fund (cash + vouchers) is always constant (300). The cash added to the fund simply replaces the expense vouchers.
Petty Cash Replenishment Bookkeeping Entries Explained
Debit: Supplies and postage are recorded as expenses of the business.
Credit: Cash went out of the business to pay the expenses.
The Accounting Equation
The accounting equation, Assets = Liabilities + Equity means that the total assets of the business are always equal to the total liabilities plus the equity of the business. This is true at any time and applies to each transaction.
For this transaction the accounting equation is shown in the following table.
In this case an asset (cash) decreases representing money paid out by the business for cash expenses; this decrease is balanced by a corresponding decrease in equity (retained earnings) on the other side of the accounting equation.
It should be noted that the debit to the income statement for the expenses, reduces the net income which reduces the retained earnings and therefore the equity in the business.
Popular Double Entry Bookkeeping Examples
This petty cash replenishment journal entry is one of many bookkeeping entries used in accounting, discover another at the links below.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.