 Hello, in this lecture we will define petty cash. According to fundamental accounting principles, while 22nd edition, the definition of petty cash is small amount of cash in a fund to pay minor expenses, accounted for using an impressed system. When we think about petty cash, we're going to think about that small amount of cash we're going to keep on hand in order to spend for those miscellaneous items that we can spend cash for. We don't want the cash amount on hand to be too large because it is a liquid asset, has inherent risk, and therefore we don't want too much of it on hand at any given time. However, we do want a small amount on hand because it's convenient to pay for those miscellaneous items. Therefore, we're going to have a system where we have a set amount that's going to be the idea of this impressed amount. We're going to say this is the set amount we want and then we're always going to basically replenish the petty cash to get it back to whatever that set amount we decide to be is. So for example, we might decide that amount is $250, take some money out of our normal cash count, the checking accounts, and put it into our petty cash somewhere where we have it in a lockbox and we can then spend it for those miscellaneous items. At the end of a period, usually like a month or a week, we're going to go into that and we're going to take a look at how much is left in the petty cash versus how much we want in the petty cash amount. So remember that we always want, remember that we always want the $250 in the petty cash. We're going to count what is in petty cash and then we're going to replenish the petty cash for whatever we need to to get it back to that $250. Notice we don't need a journal entry in the petty cash amount because it already has the $250 in it. What we need to do is record all the expenses that have happened in order to get us back to that $250 amount. So what we're going to do is we're going to put the actual amount from the checking account back into the petty cash amount to get us back to this $250, then the difference will be whatever we spent the money on and hopefully we have all the receipts in the petty cash drawer that we're going to just add up. We're going to say, oh, there's a receipt for janitorial service for miscellaneous expenses for postage for advertising. We'll add all those up. The difference between what we need to get back to the $250 and what those receipts add up to, we will then post to something like an overshort account and that'll basically track what we haven't kept track of in terms of receipts in the petty cash. So we would have to take money out of the checking account and then not put it in the petty cash. It's already at the $250 where we want it, but we'll record all the related expenses related to those items that we expended money on for the time period.