2. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting 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 AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3. Glencoe Accounting 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 AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved.

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

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

6. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Establishing a Change Fund The Change Fund Section 22.1 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

7. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Short and Over Section 22.1 See page 647 The Petty Cash Fund

8. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Change Fund The Change Fund Section 22.1 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.

9. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Short and Over The Change Fund Section 22.1

10. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Short and Over The Change Fund Section 22.1 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

11. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Demonstration Problems 1-4 Glencoe Accounting

12. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Terms petty cash fund petty cash disbursement petty cashier petty cash voucher petty cash requisition petty cash register The Petty Cash Fund Section 22.2

13. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Establishing the Petty Cash Fund The Petty Cash Fund Section 22.2 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.

14. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Establishing the Petty Cash Fund The Petty Cash Fund Section 22.2 petty cashier The person responsible for maintaining the petty cash fund and for making petty cash disbursements. What Is a Petty Cashier?

15. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Establishing the Petty Cash Fund The Petty Cash Fund Section 22.2 Business Transaction On May 1 Check 2151 for $100 was issued to establish the petty cash fund. See pages 650–651

16. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 Information on the Petty Cash Voucher petty cash voucher A form that provides proof of payment from the petty cash fund. Date of the payment 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

17. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 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.

18. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 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.

19. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 Petty Cash Requisition Form petty cash requisition A form requesting money to replenish the petty cash fund. See page 653

20. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 petty cash register A record of all disbursements made from the petty cash fund. Not all businesses that have a petty cash fund use a petty cash register.

21. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 See page 654

22. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 Petty cash envelopes are used to record petty cash disbursements. Each envelope has a form printed on the front of it to record disbursements.

23. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using the Petty Cash Fund The Petty Cash Fund Section 22.2 Business Transaction On May 31 Check 2341 is written to replenish the petty cash fund. See page 655–656 Journalizing the Check to Replenish the Petty Cash Fund

24. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Handling Cash Short and Over in the Petty Cash Fund The Petty Cash Fund Section 22.2 See page 657 Recording a Cash Shortage in the Petty Cash Register

25. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting 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)

26. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting 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.

27. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting 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.

28. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Demonstration Problems 5-6 Glencoe Accounting

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