How to Record Petty Cash in Quickbooks

How to Record Petty Cash in QuickBooks

Managing petty cash is an essential part of any business, as it allows for the convenient handling of small expenses. QuickBooks, the popular accounting software, offers a simple and efficient way to record and track petty cash transactions. In this article, we will guide you through the process of recording petty cash in QuickBooks and address some common questions that may arise.

Recording Petty Cash in QuickBooks:

Step 1: Create a Petty Cash Account
1. Open QuickBooks and go to the Chart of Accounts.
2. Click on “New” to create a new account.
3. Choose “Cash” as the account type.
4. Name the account as “Petty Cash” and save it.

Step 2: Set Up a Petty Cash Fund
1. Determine the initial amount of cash you want for your petty cash fund.
2. Write a check from your business bank account to “Petty Cash” for the determined amount.
3. Record this transaction in QuickBooks by going to the Banking menu and selecting “Write Checks.”
4. Choose the bank account from which the check is being drawn, enter “Petty Cash” as the payee, and input the amount.
5. Save the transaction.

Step 3: Record Petty Cash Expenses
1. When a petty cash expense occurs, obtain a receipt for the purchase.
2. Go to the Banking menu and select “Use Register” under the Petty Cash account.
3. Click on “New Transaction” and choose “Payment.”
4. Select the appropriate expense account from the drop-down menu and enter the amount.
5. Attach the receipt as supporting documentation, if possible.
6. Save the transaction.

Step 4: Replenish the Petty Cash Fund
1. When the petty cash balance is running low, it needs to be replenished.
2. Write a check from your business bank account to “Petty Cash” for the total amount you want to replenish.
3. Record this transaction in QuickBooks using the “Write Checks” option, as mentioned in Step 2.
4. Save the transaction.

Common Questions and Answers:

Q1: How often should I reconcile my petty cash account in QuickBooks?
A1: It is recommended to reconcile the petty cash account at least once a month to ensure accurate financial records.

Q2: What if I lose a petty cash receipt?
A2: While it is important to keep all receipts, if one is lost, you can still record the expense in QuickBooks by manually entering the details.

Q3: Can I use my petty cash fund for personal expenses?
A3: No, the petty cash fund should only be used for business-related expenses. Personal expenses should be managed separately.

Q4: Can I withdraw money from my petty cash fund for other purposes?
A4: It is best to avoid using the petty cash fund for purposes other than business expenses. Withdrawals should be limited to replenishing the fund.

Q5: What if I run out of petty cash before the reconciliation period?
A5: If you run out of petty cash, you can either replenish it earlier than planned or temporarily suspend petty cash transactions until the reconciliation is done.

Q6: How do I account for foreign currency transactions in petty cash?
A6: Convert the foreign currency amount to your base currency using the exchange rate at the time of the transaction and record it accordingly.

Q7: Can I use QuickBooks mobile app to record petty cash transactions?
A7: Yes, the QuickBooks mobile app allows you to record petty cash transactions on the go, making it convenient and efficient.

Q8: What if my petty cash fund goes missing or gets stolen?
A8: Report the incident to the relevant authorities and take appropriate measures to secure your funds. Adjust the petty cash account in QuickBooks accordingly.

Q9: Can I have multiple petty cash funds in QuickBooks?
A9: Yes, you can create multiple petty cash accounts in QuickBooks if you need to track expenses separately for different departments or locations.

Q10: Do I need to provide receipts for every petty cash transaction?
A10: It is best practice to obtain and keep receipts for all petty cash transactions to maintain transparency and accuracy in your financial records.

Q11: Can I automate petty cash transactions in QuickBooks?
A11: QuickBooks offers features like bank feeds and automatic transaction categorization, which can streamline the recording of petty cash transactions and make it more efficient.

In conclusion, recording petty cash in QuickBooks is a straightforward process that allows for accurate tracking and management of small expenses. By following the steps outlined above, you can easily record petty cash transactions and maintain proper financial records in your business.

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