Cash Transfer to Petty Cash Journal Entry

Petty cash is a small amount of cash that is kept on hand for small, everyday expenses. In business, petty cash is used for expenses that are too small to warrant writing a check or making a larger purchase. For example, if you need to buy a stamp or make a photocopy, you can use petty cash.

Petty cash is typically kept in a locked box or drawer, and it is replenished when the funds run low. To prevent theft, businesses often require employees to sign for any petty cash they withdraw. Businesses still need to track their petty cash expenditures in order to stay organized and efficient.

To ensure that the account has enough money to cover these types of expenses, the company needs to regularly transfer cash from other accounts into the petty cash account. This transfer can be done by writing a check or making an electronic transfer.

The amount of money that is transferred should be based on the company’s estimated need for petty cash expenses. By Transferring funds into the petty cash account on a regular basis, the company can ensure that there is always enough money available to cover these types of expenses.

Journal Entry for Cash Transfer to Petty Cash

The company usually transfers cash from cash at the bank or cash on hand to the petty cash account. It aims to refill the petty cash balance to the maximum balance.

The journal entry is debiting petty cash and credit cash at bank or cash on hand.

Account	Debit	Credit
Petty Cash	XXX
Cash at Bank/Cash on Hand		XXX

The entry will increase the petty cash balance on the balance sheet. It also reduces the other cash balance.

Example

ABC is a construction company that provides construction services to customers. The accountant keeps the petty cash balance of $ 1,000 which enable the employee to pay for an urgent and small payment. At the end of the month, the petty cash balance remains only $ 300, so it requires refilling the petty cash balance back to $ 1,000. The accountant transfer cash from bank account. Please prepare journal entry for cash transfer to petty cash.

The company needs to refill the petty cash balance back from $ 300 to the maximum balance which is $ 1,000.

The company has to transfer the cash $ 700 from bank account to petty cash account.

The journal entry is debiting petty cash $ 700 and credit cash at bank $ 700.

Account	Debit	Credit
Petty Cash	700
Cash at Bank		700