How To Do Revolving Fund or

Petty Cash Accounting Using

QuickBooks Online
By: Felix Domingo, CPA, CMA
felixacct@gmail.com
+63 956 417 2033
What are Revolving Fund (Imprest Accounts) or Petty Cash Funds?

“Revolving Fund” is that it is an Imprest Account Fund or Petty Cash Fund. An imprest account is used for
handling minor disbursements whereby a fixed amount of money is set aside for this purpose.

Disbursements are made as needed with a receipt or petty cash voucher being completed in each case.

At certain intervals, or when the imprest account is completely expended, the imprest account is
replenished. The total of petty cash on hand plus the amount of signed receipts or petty cash vouchers at
any one time must equal the total amount authorized for the imprest account
Steps in Petty Cash Accounting

Step 1: Establish Petty Cash Policies & Procedures

Step 2: Transfer Cash to a Lock Box

Step 3: Reimburse Receipts and Record Expense in the Petty Cash Log

Step 4: Reconcile Petty Cash Regularly

Step 5: Complete the Bottom Portion of the Petty Cash Log

Step 6: Replenish Cash in Lock Box

Step 1: Establish Petty Cash Policies & Procedures

Having a petty cash fund speeds up reimbursements and enables your employees to perform quick errands
without using personal money. You have to craft a clear petty cash policy, as it sets out the purpose and
use of the petty cash fund.

The policy should define the following:

 List Allowable Expenses

With a petty cash fund in place, you can pay for small expenses like postage stamps, office
supplies, office food and drinks, fuel expenses, parking tickets, and other unpredictable expenses. Any
expense that’s too small to write a check for can be paid with cash from the petty cash fund. Note that
it’s a good idea to set a maximum dollar amount for allowable expenses.

 Delegate a Petty Cash Custodian

The petty cash custodian is the person accountable for the petty cash fund. They’ll be in charge of
handling and disbursing petty cash and ensuring that the petty cash fund is used for its intended
purpose. They’re also responsible for the safekeeping of the physical cash and possess the key to the
lockbox where the cash and receipts are kept.
Step 1: Establish Petty Cash Policies & Procedures

In your petty cash policy document, include the name and signature of the custodian so that
there’s an official transfer of accountability for the petty cash.

 Set the Maximum Fund & Reimbursement Threshold

Most companies maintain a petty cash fund balance of anywhere from P 1,000 to P 5,000, but the
amount will depend on your petty cash needs.

To illustrate further, assume that we have a fund balance of P 5,000. Our policy states that petty
cash reimbursements shouldn’t exceed 10% of the fund balance. This means that expenses above P
50 cannot be charged to petty cash. However, we can also specify that certain expenses are always
chargeable to petty cash, even if they’re above P 50.
Step 2: Transfer Cash to a Lock Box (Cash Box)

The petty cash custodian will keep all petty cash items inside a lock box (cash box). Only the custodian can
access the cash box—and it mustn’t be left opened and unattended. Inside the box, you’ll find currencies
and receipts.

Let’s look at a sample: To initially set up the petty cash fund for P 3,000 in the books, you or the
bookkeeper need to make the following journal entry:

Debit Credit
Petty cash fund 3,000
Cash in bank 3,000

A petty cash fund is a current asset account that should appear on your balance alongside other cash
accounts, like checking and savings accounts. After recording the journal entry, the custodian should
receive P 3,000 cash or check from the owner or cashier.
Step 3: Reimburse Receipts and Record Expense in the Petty Cash Log

To reimburse expenses, require a receipt from the employee and then provide them with the exact amount
of cash and coins from the lockbox. Then, place the receipt in the lockbox and record the expense in the
petty cash log by entering the date, payee, description, reference number, and amount.

Here’s an example of a petty cash log, followed by the fields you need to complete:
[COMPANY NAME]
Enter
Indicate
the official
theWrite
date
receipt
the
whenname
number.
reimbursement
of the PETTY
If there’s
employee CASH
none,
was who
made.LOG
youasked
mayIndicate
leave
for reimbursement.
itthe
blank.
amount reimbursed.
Custodian: John Doe
Date Payee Description/Purpose Ref. No. Amount
xxx xxx xxx xxx xxx
    Explain the  expense briefly. For example, you can write, “Fuel
  expense  
Beginning Balance for delivery trucks” or “Postage stamp cost.” P xxx
The bottom
Total Petty Cash Expenses portion of the petty cash log won’t be completed until the P xxx
Ending Balancecash in the lock box needs to be replenished. There’s no need to make P xxx
journal entries when expenses are reimbursed from cash in the
Total Replenishment Requested P xxx
lockbox.
   
Custodian’s Signature:_______________________  
Step 4: Reconcile Petty Cash Regularly

Petty cash must be reconciled when the cash is replenished. However, the petty cash custodian may
perform weekly or daily reconciliation to keep track of the fund balance. Using a cash count sheet can be
used to document the cash count, but it’s optional.

The reconciliation is straightforward—every time you take cash out of the box, you replace the cash with a
receipt for the same amount. Therefore, all receipts plus remaining cash must be equal to the original
amount placed in petty cash.
Step 5: Complete the Bottom Portion of the Petty Cash Log

Every month, or as cash is needed, the custodian should summarize the petty cash log by expense
account and record a journal entry debiting each expense and crediting petty cash.
[COMPANY NAME]
PETTY CASH LOG
Custodian: John Doe
Date Payee Description/Purpose Ref. No. Amount
xxx xxx xxx xxx xxx
         
Beginning Balance P xxx
Total Petty Cash Expenses P xxx
Ending Balance P xxx
Total Replenishment Requested P xxx

Enter the petty cash fund balance as the beginning balance. Then, get the total of the Amount column to
determine total petty cash expenses. That’s also the amount you’ll ask for as reimbursement. The ending
balance is the difference between the beginning balance and the total petty cash expenses. The currencies
inside the lockbox should be equal to the ending balance.
Step 6: Replenish Cash in Lock Box

After the owner or bookkeeper records all expenses in the books, cash must be taken from the checking
account to replenish the petty cash box. Record the transfer of cash by debiting Petty Cash and crediting
Checking Account.
How to set up a petty cash account in QuickBooks Online

1. Click Accounting on the left-hand side menu

and then choose Chart of accounts.
How to set up a petty cash account in QuickBooks Online

2. In the upper right portion of the window, click the green New button to create a petty cash account.
How to set up a petty cash account in QuickBooks Online

3. From the Account Type dropdown▼,

choose Cash and Cash
equivalents.
4. From the Detail Type dropdown▼,
choose Cash on hand.
5. Enter Petty Cash Fund for the
account name.
6. The opening balance will be created
when you move money from the
checking account by writing a check
or transferring funds. If you already
have money to use for petty cash,
enter the amount in the Balance field
and choose the as of date.
7. Select Save and close.
How to manage petty cash

Now that we've created the account, it's time to put some money in it. Here's how to get started and keep
up with everything you do in petty cash.

Tip: You should designate one person at your company to manage the petty cash box and keep track of
each withdrawal.

Put cash in
1. Withdraw some cash from your current account and put it in a locked cash box.
2. Record the transaction in QuickBooks Online.
o If you wrote a check for cash:
a. Select + New.
b. Select Cheque.
c. Select Petty Cash as the payee. Select +Add new if petty cash isn't in the list of payees.
o If you took out the cash without writing a check:
a. Select + New.
b. Select Transfer.
How to manage petty cash – Writing a Check for Cash
How to manage petty cash – Writing a Check for Cash

Choose a Payee in aSelect the bank

dropdown lists account where
for the petty to withdraw the fund.
cash
Date of
custodian name or Select +Add new if petty cash Enter the Check Number
custodian isn't in the list. transaction

Select the Petty CashEnter

Fundthe
Put petty cash
a short fund amount.
description of the
transaction.

To post the transaction, click “Save and Close”.

How to manage petty cash - took out the cash without writing a check
How to manage petty cash - took out the cash without writing a check

Select the source of fund, your bank

account.
Select where you will put the fund , like “Petty Cash
Fund”
Enter the amount transferred

Put a short description of the

transaction.
How to manage petty cash

Take cash out

When you give cash to an employee or use petty cash yourself, record it with a slip of paper to track who,
when, and what the money was used for. This is like a receipt to track the cash that you take out.

In QuickBooks, record taking cash from petty cash as an Expense with petty cash as the payment account.

At all times, the amounts on the slips of paper and the cash you have left should add up to the amount you
deposited in the box.

Tip: It’s a good idea to reconcile your petty cash account regularly. Once you do, you can move your paper
slips to your long-term record keeping, because the transactions are in QuickBooks.
How to record petty cash expenses
How to record petty cash expenses

Select the Petty Cash Fund as the payment amount.

Capabilities and limitations (continued…)