Question

What is the purpose of a Petty Cash Fund? Provide an example journal entry that a company might use to set up a Petty Cash Fund. Additionally, provide two example journal entries of payments from the Petty Cash Fund AND one example journal entry example to replenish the balance in the fund.

Answer 1

Main purpose of the petty cash fund is to pay for all the minor expenses which are very small in value and paying in cash is the most feasible solution for such expenses.

Journal entry to set up a petty cash fund can be:

Date	Particulars	L.F	Amount ($)	Amount ($)
Jan-01	Petty Cash		100
	Cash			100
	(For petty cash fund established)

Two example journal entries of payments from the Petty Cash Fund AND one example journal entry example to replenish the balance in the fund can be:

Date	Particulars	L.F	Amount ($)	Amount ($)
Apr-01	Petty Cash		390
	Cash			390
	(For petty cash fund established)
Apr-15	Janitorial Service		104
	Cash			104
Apr-15	Office Supplies		100
	Postage Stamps		33
	Advertisement exp		125
	Cash over and short		6
	Petty cash			264
	(For petty cash fund was replenished)
Apr-15	Petty Cash		488
	Cash			488
	(For petty cash fund increased)
Apr-30	Office Supplies		125
	Travelling exp		61
	Courier Charges		23
	Petty cash			209
	(For petty cash fund was replenished)
Apr-30	Petty Cash		149
	Cash			149
	(For petty cash fund increased)