Petty Cash Account

Legacy KB ID: 171

Question

How do I handle out-of-pocket or petty cash expenses?

Answer

Most businesses find it convenient to pay cash for minor day-to-day expenses like postage and taxi fares. Some pay from a petty cash fund that they replenish from time to time. Others pay from personal funds, and reimburse themselves from the business bank account. You can use either method. For better tracking, we recommend that you handle all petty cash transactions through a petty cash account, as described below: Setting up a petty cash account Create an account for petty cash in your Chart of Accounts in QuickBooks. Use a Bank account type. The advantages of using this instead of another account type like Other Current Asset are: - Your Petty Cash account will appear at the top of your balance sheet reports with other money accounts, such as your savings and cheque accounts. - You can write and print "cheques" from your Petty Cash account, which can serve as paper records, similar to receipts or vouchers. Transferring money to your petty cash account When you withdraw cash from your cheque/savings account, enter the transaction as a payment to your Petty Cash account. Note that you can also write a cheque, instead of using the account register. 1) From the Lists menu, choose Chart of Accounts. 2) Select the Bank account you're withdrawing from, and double-click to display its register. 3) Remove the supplied cheque number and type "ATM" or "CASH", unless you're cashing an actual cheque. 4) Enter the amount withdrawn in the Payment column. 5) In the Account column, choose your Petty Cash Account. 6) Click Record. Making payments from your petty cash account When you pay for business expenses with cash, enter the transaction as a payment from your Petty Cash account. Note that you can also write a cheque, instead of using the account register. 1) From the Lists menu, choose Chart of Accounts. 2) Select your Petty Cash account, and double-click to display its register. 3) Enter the amount spent in the Payment column. 4) In the Account column, enter the appropriate expense account. Or use the Splits feature to represent different expense items. 5) Click Record.

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