How to Record Petty Cash in QuickBooks
Petty cash is a small amount of money that businesses use for day-to-day expenses such as buying office supplies, reimbursing employees for small purchases, or covering minor expenses. Keeping track of petty cash is crucial for maintaining accurate financial records. QuickBooks, the popular accounting software, provides a simple and efficient way to record and manage petty cash transactions. Here’s a step-by-step guide on how to record petty cash in QuickBooks:
Step 1: Create a Petty Cash Account
In QuickBooks, go to the Chart of Accounts and create a new account called “Petty Cash” under the Cash category. This account will be used to track all petty cash transactions.
Step 2: Set Up Petty Cash Funds
Decide on the amount of petty cash you want to maintain and withdraw that amount from your bank account. Keep the cash in a safe place, such as a locked drawer or cash box, and designate a responsible person to handle petty cash transactions.
Step 3: Record the Initial Petty Cash Fund
In QuickBooks, create a journal entry to record the initial petty cash fund. Debit the Petty Cash account for the amount withdrawn and credit the Bank account for the same amount.
Step 4: Record Petty Cash Expenses
Whenever petty cash is used for an expense, create an expense transaction in QuickBooks. Select the appropriate expense account, enter the amount, and choose the Petty Cash account as the payment method. Make sure to attach any receipts or supporting documents.
Step 5: Replenish the Petty Cash Fund
When the petty cash fund is running low, replenish it by writing a check or making a bank transfer. Use the appropriate expense accounts to record the replenishment and credit the Bank account for the same amount.
FAQs:
1. What if I don’t have a petty cash account in QuickBooks?
You can easily create a new account by going to the Chart of Accounts and selecting “New.” Choose the Cash category and name it “Petty Cash.”
2. Can I track individual expenses from the petty cash fund?
Yes, you should record each petty cash expense as a separate transaction in QuickBooks. This allows for better tracking and reporting.
3. How often should I reconcile the petty cash account?
It is recommended to reconcile the petty cash account at least once a month to ensure accuracy.
4. Should I keep a log of all petty cash transactions?
Yes, maintaining a petty cash log helps in keeping track of all transactions, including dates, amounts, and purposes.
5. Can I use petty cash for personal expenses?
No, petty cash should only be used for business-related expenses.
6. What if the petty cash fund is lost or stolen?
Report the incident to the appropriate authorities and your insurance provider. Adjust your financial records accordingly and replenish the petty cash fund.
7. Can I withdraw more money for the petty cash fund if needed?
Yes, you can withdraw more money from your bank account to replenish the petty cash fund whenever necessary. Remember to record the transaction in QuickBooks.