Coding Petty Cash
One of the most frequent mistakes accountants see on financial statements is the miscoding of petty cash. It is a very simple concept to grasp but for bookkeepers who do not know what theyre doing, they can really make a mess of this simple entry.
Most bookkeepers and non-financial staff code expenses directly to the petty cash account instead of to the actual expenses. The only time the cash account should be affected is when you increase or decrease the petty cash limit.
For example, your petty cash fund is $275.00. You give staff money and they bring you receipts for food, supplies, services, postage, etc. which total $251.00. You would either do a journal entry debiting each expense and crediting cash or you would write a check to cash and code each expense. Does this make sense?
The point is, you never code expenses to a cash account. When you look at your petty cash on the financial statement, it should not exceed the $275 youve allotted. Please feel free to email me if you have questions!