When cash is short, the entry to replenish petty cash includes a..

• A. Debit Cash
• B. Credit Cash
• C. Debit Cash Short and Over
• D. Debit Petty Cash

Answer: (C)

When replenishing petty cash, you restore the fund to its established amount by recording the actual expenditures and the cash shortfall if any. The shortage must be recognized as an expense, so you debit Cash Short and Over for the amount of the shortfall. You also debit the appropriate expense accounts for the receipts and credit Cash for the total replenishment to bring the petty cash balance back up. This keeps both the petty cash balance and the company’s overall cash accurately reflected.

Example: if the petty cash fund is 200, receipts total 170, and counting shows 15 on hand (a 15 cash short), you would debit the expense accounts for 170, debit Cash Short and Over for 15, and credit Cash for 185. After the entry, the petty cash fund is restored to 200.