Negative Balance in Petty Cash Account

Dear Wajid

Please note as everybody is saying a cash account can not be negative and as mentioned by Hareesh these expenses are not allowable under IT.

But I hope, still the big question is what is the solution for this?????

See, If it is once or twice a year then you can create an account with the name of Petty cashier as creditors and book the the transactions.  But it is a routine then change the accounting style.  Instead of treating it as petty cash under cash open an account with the name of petty cashier as imprest account under loan and advances and book all expenses in that.  That way you can avoid having a negative balance in cash book and an employee can claim excess amount spent.

Hope, this will solve the issue.

Regards

Charanjit

Originally posted by : Manmohan
	Just debit cash and credit petty cashierbeing cash received from Mr. X (say he is petty cashier) pass following   Cash A/c  __________________________ Dr.  XXXX        To Mr. X________________________________XXXX   in it is the  balance sheet date then Mr. X will be shown as under loans  and advances, Advances head

what about the concept of "substance over form"

Petty cash balance: Rs. 1000

Paid for gardening - Rs. 500

Paid for conveyance charges - Rs. 500

Petty cash balance exhausted.... close account

Sweeping Charges Rs. 500

Provide these in books of account as:

1. Sweeping chgs .. Dr.

          To Prov for exps

(Being expenses provided for inadequacy of cash)

2. Prov for Exps.... Dr.

          To Cash

(Being cash paid for sweeping charges)

entry no. 2 will be passed on withdrawing cash from bank

In my opinion personal cash should not be used by the cashier.

You cannot create the employee as a sundry creditor in your books but instead open a seperate account Emp Petty Cash a/c under Current Liabilities!