Petty Cash A petty cash fund is a specified amount of cash that is placed under the control of an employee for the purpose of making small payments. The purpose of a petty cash fund is to allow for making payments that might be impractical by check. An illustration of the design and working of a petty cash system for the Jordan Company follows: 1. An employee is chosen to be the custodian of the petty cash fund. The fund is established at an amount estimated to be sufficient to cover petty cash expenditures for a short period of time. The Jordan Company determined that the appropriate amount should be $200. The general journal entry to establish the petty cash fund is: 2. Petty cash vouchers are given to the custodian of the fund. These vouchers are prenumbered and used as evidence of payments from the fund. A petty cash voucher is prepared each time a payment is made, but the payments are not recorded in the accounting records until the fund is replenished. An example of a petty cash voucher is illustrated in Exhibit. 3. The petty cash fund needs to be replenished periodically. When the amount of cash in the petty cash fund is low, or at the end of the month, the petty cash vouchers are sorted by account number. The Jordan Company's sorting of vouchers reveals the following account charges during the month. When the fund is replenished, a check is prepared for the total amount. The petty cash custodian cashes the check to replenish the supply of currency in the petty cash fund. Subse-quently, the actual expenses incurred are debited and the regular cash account is credited in the accounting records. Jordan Company will make the following general journal entry to record the replenishment of its petty cash fund. Note that the general ledger Cash account, not the Petty Cash account, is credited when the fund is replenished. The Petty Cash account is always carried at its original amount in the accounting records: