Petty Cash Fund

A petty cash fund may be established in a department when there is evidence that a continuing cash advance should be kept on hand to permit the purchase of low-value supplies and services that cannot be purchased under the Low-Value Purchase Authorization procedures. In the absence of such evidence, procurement cards, blanket purchase orders, and miscellaneous blanket authorizations are used to purchase low-value supplies through the Storehouse, Central Duplicating, Central Garage, and other University service departments. Each campus places its own restrictions on the petty cash funds established on its campus, including the amount of cash in the fund and a dollar limit per expenditure. Each fund must be used strictly in accordance with the purpose for which it was authorized.

Petty cash fund is established by means of a check in conformance with the imprest system of internal control for cash. The check is typically drawn to the order of a petty cash custodian who will be responsible for the custody of the fund.

The entry to record the establishment of a petty cash fund is:

Date Petty Cash Fund           xx  
              Cash in bank             xx


A designated employee prepares a pre-numbered voucher, which is recorded with detailed information and authorized by a separate designated employee to ensure segregation of duties. Here, both preparer and authorizer rely on supporting documents (e.g., bills, invoices, and receipts) to justify the expense. The voucher is forwarded to the custodian of the petty cash fund who verifies the voucher and supporting documents to ensure authenticity and dual authorization and then disburses the cash under acknowledgment

In the case of advance payments, invoices and receipts would arrive after payment has been made and be reconciled to the amounts advanced. If any unused cash remains from the paid petty cash voucher, it is added back into the petty cash fund by issuing a prenumbered and approved replenishment voucher (with acknowledgment from the petty cash custodian to signify the cash has been received by the custodian and is included in the petty cash). There is no journal entry made during disbursement.


At least once a month, petty cash is replenished. All vouchers are sorted and summed up with respect to each type of expense and recorded in the system. At this point, the suspense account and physical cash (if any) should be equal. The petty cash fund is replenished by the amount of total expenditures incurred during the month.

The entry to record the replenishment is:

Date         Various expense accounts xx  
                  Cash in bank   xx

 Adjustments for Unreplenished Petty Cash Fund

Any unreplenished petty cash fund should to be adjusted in order not to overstate cash and not to understate expenses.

The entry to record adjustment is:

Date Various expense accounts           xx  
                 Petty Cash Fund   xx

 Subsequent changes in ledger balance of Petty Cash fund

When subsequently, a board resolution is made to change the ledger balance of the petty cash fund.

The entry to record the increase in petty cash fund balance is:

Date Petty Cash Fund xx  
               Cash in bank   xx

The entry to record the decrease in petty cash fund balance is:

Date Cash in bank xx  
                Petty Cash Fund   xx