How to account for Petty Cash in QuickBooks
If you use Petty cash in your business, here's how to account for it correctly in QuickBooks. Make sure that, however much petty cash you keep on hand, it is secured in a locked box or desk. Minimizing the amount you keep on hand also minimizes your risk.
First, write a check payable to cash (or just withdraw cash) from your business checking account. Input the transaction in QB as a check, payable to Cash, and code it to an account called Petty Cash. If you don't yet have a Petty Cash account in your chart of accounts, you can add it and the best way to do this is to call it a Bank Account (not an expense account). That will allow you to see it represented on your balance sheet.
When you use the cash to fund expenses, such as postage for instance, make sure you put the receipt back into your petty cash box. For example, if you spend $9.60 on postage and your Petty Cash box was funded with $100.00, you'll be left with $90.40 remaining in the box plus your receipt from the post office for $9.60.
You can keep spending your petty cash in this manner, saving receipts for every expenditure, until you run so low that you need more cash. Add up all your receipts (in our example $9.60 plus any other receipts you have accumulated) and write another check payable to cash (or make a cash withdrawal) for the total amount of the receipts. You'll enter this to QB as another check payable to cash again but, this time you'll want to code it against the expense accounts representing what you spent the money on: in our example, $9.60 would be coded to your Postage expense account. Save your receipts with the check backup as documentation for your files.
This results in a once-again full cash box at $100.