Reimbursing Petty Cash Fund

What is the entry to reimburse the petty cash fund?

If the petty cash box fund is established at $400 and receipts total $275, and there is $120 cash in the drawer, what is the entry to reimburse the fund?

Answer:

To replenish the petty cash fund to the original amount of $400, you need to subtract the remaining cash in the drawer ($120) from the original petty cash fund ($400). This means that a reimbursement of $280 is needed.

When dealing with a petty cash fund, it is crucial to maintain the fund at the designated amount for operational purposes. In this case, the original petty cash fund was established at $400. However, with receipts totaling $275 and cash of $120 still in the drawer, the fund needs to be reimbursed to reach its initial balance.

The formula to calculate the reimbursement amount is simple. By subtracting the cash remaining in the drawer from the original petty cash fund, you can determine the amount needed to replenish the fund. In this scenario, the formula would look like this:

Reimbursable amount = Established Petty Cash Fund - Cash remaining in Drawer

Plugging in the numbers, the calculation would be: $400 - $120 = $280. Therefore, an entry of $280 should be reimbursed into the petty cash fund to bring it back to its original amount.

Reimbursing the petty cash fund accurately ensures that there are enough funds available for small, day-to-day expenses without disrupting the company's cash flow. By following proper reimbursement procedures, you can maintain financial stability and accountability within the organization.