Chapter 10
Cash Controls
312
The cheque is recorded with a debit to various expenses (parking, delivery, office supplies, gasoline,
cash over and short), and a credit to cash in the amount of $85. Figure 10.31 shows this transaction.
Notice that the journal entry includes the numerous expenses. On the Accounting Map, these
expenses are listed under operating expenses on the income statement.
Journal
Page 1
Date
2016
account title and
explanation
Debit Credit
Dec 17 Parking Expense
21
Delivery Expense
24
Office Supplies
Expense
20
Gasoline Expense
18
Cash Over and Short
2
Cash
85
Replenish the petty
cash fund
______________
FIGURE 10.31
INVENTORY
ASSETS
CASH
PETTY CASH
–$85 CR
INCOME STATEMENT
GROSS PROFIT
SALES REVENUE
COST OF GOODS SOLD
OPERATING EXPENSES
+$85 DR
The cash over and short account behaves like an expense account when there is a shortage. It will
be debited in the journal entry. If there is an overage, the cash over and short account behaves like
a revenue account. It will be credited in the journal entry.
No change is made in the amount of the petty cash ledger account when the reimbursement
cheque is issued, and the reimbursed cash is placed in the petty cash box. You may think that the
transaction should be recorded by debiting expenses and crediting petty cash, followed by a debit
to petty cash and a credit to cash. However, in practice, when the bookkeeper records the cheque
there is no change to the petty cash account.
It is important to note that the
only
time the petty cash account in the ledger is debited or credited is
when the account is established or when the amount in the petty cash fund is increased or decreased.
Assume that on December 31, the manager decided to increase the petty cash fund to $150. The
journal entry to record the $50 increase is shown in Figure 10.32.
Journal
Page 1
Date
2016
account title and explanation
Debit Credit
Dec 31 Petty Cash
50
Cash
50
Increase the petty cash fund
______________
FIGURE 10.32
When the petty cash fund is increased, the petty cash account should be debited (increased) and
the cash account should be credited (decreased).
