2. Some businesses keep cash on hand to make change for customers
Some businesses keep cash on hand to make change for customers. Businesses may use petty cash funds because writing checks for small amounts is impractical, costly, and time consuming.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3. Record the entry to establish a change fund.
Prove the cash in the cash drawer each business day.
Open and replenish a petty cash fund.
Journalize opening a petty cash fund.
Prepare a petty cash requisition to replenish the petty cash fund.
Use a petty cash register to record petty cash disbursements.
Journalize replenishing a petty cash fund.
Determine whether cash is short or over, and record the shortage or overage.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4. Section 22.1
The Change Fund
Key Term
change fund
Glencoe Accounting

5. Establishing a Change Fund
Section 22.1
The Change Fund
The Change Fund
Debited for the check amount and the Cash in Bank account is credited for the check amount
Established by writing a check
change fund
An amount of money, consisting of varying denominations of bills and coins, that is used to make change in cash transactions.
Glencoe Accounting

6. Establishing a Change Fund
Section 22.1
The Change Fund
Business Transaction
On May 1 the accountant for The Starting Line wrote Check 2150 for $100 to establish a change fund.
See pages 645–646
Glencoe Accounting

7. Recording Cash Short and Over
Section 22.1
The Petty Cash Fund
See page 647
Glencoe Accounting

8. Using the Change Fund
Section 22.1
The Change Fund
The amount of cash in the change fund is put in the register drawer at the beginning of the day.
Cash sales that occur throughout the day are recorded on the register tape.
At the end of the day, the amount in the cash drawer minus the cash fund amount should equal the total sales shown on the cash register tape.
Glencoe Accounting

9. Recording Cash Short and Over
Section 22.1
The Change Fund
Glencoe Accounting

10. Recording Cash Short and Over
Section 22.1
The Change Fund
Business Transaction
On May 2 the cash register tape shows that cash sales are $520 and sales taxes are $26, for a total of $546. The actual cash in the cash register drawer, after subtracting the amount of the change fund, is $545.
See page 648
Glencoe Accounting

11. Key Terms petty cash fund petty cash disbursement petty cashier
Section 22.2
The Petty Cash Fund
Key Terms
petty cash fund
petty cash disbursement
petty cashier
petty cash voucher
petty cash requisition
petty cash register
Glencoe Accounting

12. Establishing the Petty Cash Fund
Section 22.2
The Petty Cash Fund
When setting up a petty cash fund, each business determines the maximum amount that will be paid out by a petty cash disbursement.
petty cash fund
Cash kept on hand for making small, incidental cash payments.
petty cash disbursement
Any payment made from the petty cash fund.
Glencoe Accounting

13. Establishing the Petty Cash Fund
Section 22.2
The Petty Cash Fund
What Is a
Petty Cashier?
petty cashier
The person responsible for maintaining the petty cash fund and for making petty cash disbursements.
Glencoe Accounting

14. Establishing the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Business Transaction
On May 1 Check 2151 for $100 was issued to establish the petty cash fund.
See pages 650–651
Glencoe Accounting

15. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Information on the Petty Cash Voucher
Date of the payment
petty cash voucher
A form that provides proof of payment from the petty cash fund.
Person or business to whom the payment is made
Amount of the payment
Reason for the payment
Account to be debited
Signature of the person approving the payment
The signature of the person receiving the payment
Glencoe Accounting

16. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Replenishing the Petty Cash Fund
Replenishing the petty cash fund restores the fund to its original cash balance.
This requires reconciling the cash balance in the fund and preparing a petty cash requisition form.
Glencoe Accounting

17. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Reconciling the Petty Cash Fund
The total from the cash vouchers is subtracted from the original cash balance.
The difference is the reconciled petty cash balance.
Glencoe Accounting

18. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Petty Cash Requisition Form
petty cash requisition
A form requesting money to replenish the petty cash fund.
See page 653
Glencoe Accounting

19. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Not all businesses that have a petty cash fund use a petty cash register.
petty cash register
A record of all disbursements made from the petty cash fund.
Glencoe Accounting

20. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
See page 654
Glencoe Accounting

21. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Petty cash envelopes are used to record petty cash disbursements.
Each envelope has a form printed on the front of it to record disbursements.
Glencoe Accounting

22. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Journalizing the Check to Replenish the Petty Cash Fund
Business Transaction
On May 31 Check 2341 is written to replenish the petty cash fund.
See page 655–656
Glencoe Accounting

23. Using the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Journalizing the Check to Replenish the Petty Cash Fund
Business Transaction
On May 31 Check 2341 is written to replenish the petty cash fund.
See page 656
Glencoe Accounting

24. Handling Cash Short and Over in the Petty Cash Fund
Section 22.2
The Petty Cash Fund
Recording a Cash Shortage in the Petty Cash Register
See page 657
Glencoe Accounting

25. Question 1
On March 1 Ed’s Hardware established a change fund for $200. What steps do you need to take to record the journal entry for this transaction?
Step 1: Identify the accounts affected.
The accounts Change Fund and Cash in Bank are affected.
Step 2: Classify the accounts affected.
Change Fund and Cash in Bank are asset accounts.
Step 3: Determine the amount of increase or decrease for each account affected.
Change Fund is increased by $200. Cash in Bank is decreased by $200.
(continued)
Glencoe Accounting

26. Step 4: Which account is debited? For what amount?
Question 1
On March 1 Ed’s Hardware established a change fund for $200. What steps do you need to take to record the journal entry for this transaction?
Step 4: Which account is debited? For what amount?
Increases to asset accounts are recorded as debits. Debit Change Fund for $200.
Step 5: Which account is credited? For what amount?
Decreases to asset accounts are recorded as credits. Credit Cash in Bank for $200.
Glencoe Accounting

27. Question 2
If the petty cash fund does not balance, what account is affected to indicate the error?
You would debit Cash Short & Over in the event of a shortage or credit the same account in the event of an overage.
Glencoe Accounting

28. End of