Petty cash

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
OK i finally get the hang of PEARLS and know where i am debiting and crediting and then i go to post petty cash!

The way i see it.....it is an expense therefore is a debit...but no its a credit! How lost am i now, can you help?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Petty cash

    Hi Ema

    When you go to the bank and cash a cheque for your petty cash tin the double entry is:

    Dr Petty Cash
    Cr Bank

    Then..... when you buy some stamps the double entry is

    Dr Postage
    Cr Petty cash

    So, yes you are right it is both a debit and credit. Try and think of it as another bank account, that might help.

    Post again if you are still confused.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Petty cash

    Ok thank you..i am still confused because i thought i could work everything out from the PEARLS and now am a bit worried! Is it just something you have to remember or van i just not see the logic from the whole pearls thing?
    Ema
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Petty cash

    Hi Ema.

    It is your postage stamps which are the expense, hence the debit entry to stamps, and the credit entry to petty cash.

    If an asset increases it is a debit (in this case you have more stamps).

    If an asset decreases it is a credit (you have less money in your tin).

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Petty cash

    Think about which bit you are dealing with - if it is a straight expense, then exactly the same as if it was bought by cheque.

    You only need to be careful if you are drawing cash out of the bank - it is still a debit because it is an expense (ie your bank balance goes down!), but the other side of the double entry is the petty cash balance (which goes up!).

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Petty cash

    To expand a little on what Claudia said.

    One thing that PEARLS doesn't cover is receipts (Dr) and payments (Cr) in the bank/cash book and petty cash.

    When you move money from the bank/cash book into petty cash you credit bank (as it's a payment) and debit petty cash (as it's a reciept).

    When you make a payment from petty cash (eg for postage) you credit petty cash (payment) and debit the postage account (expense).

    Chris



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Petty cash

    Don't think of withdrawing money from the bank for petty cash as an expense - think of it that you are moving it from one pot to another.

    You are reducing one asset (cr bank) and increasing another (dr petty cash).

    Then when you finally buy something with the petty cash money is when you record it an expense and reduce your petty cash asset.

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