---
title: "How to record petty cash in QuickBooks Online | Ledgerbrook"
source: https://ledgerbrook.com/fixes/petty-cash/
description: "Petty cash in QuickBooks Online: set up a Bank account, fund the box, record receipts, top up, and reconcile cash on hand."
---

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# How to record petty cash in QuickBooks Online

Updated October 12, 2026 · [Omkar Moraye](/about/)

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## How do I record petty cash in QuickBooks Online?

Set up petty cash in QuickBooks Online as 1 Bank account with the Cash on hand detail type. Fund it with a transfer from checking, record each purchase as an expense paid from Petty Cash with its receipt, and top it up with another transfer. Its balance should always equal the cash in the box.

Sounds like

- Cash removed from checking to stock an office lockbox sits in Uncategorized Expense
- Small cash purchases are paid out of pocket without matching receipts in QuickBooks
- The petty cash register balance on the balance sheet does not match the currency in the drawer
- Paper receipts pile up in a lockbox without being recorded against the cash on hand register

## What is petty cash in accounting?

Petty cash is a small amount of currency kept on hand for minor expenses where a check or a company card is impractical: postage, parking, a last-minute box of supplies.

Most businesses run petty cash as an imprest fund. The business sets a fixed amount, the float. As authorized employees spend cash for minor items, they place itemized vendor receipts back into the lockbox. At all times, the cash remaining in the box plus the total of all receipt vouchers must equal the float. When cash runs low, the custodian enters the expenses into QuickBooks and replenishes the drawer back to its target balance.

### Is petty cash an asset?

Yes, petty cash is a current asset on the balance sheet, grouped under cash and cash equivalents alongside checking and savings accounts.

Placing currency into a lockbox does not create an expense deduction. An expense occurs only when someone spends that currency on an ordinary and necessary business purchase and files the corresponding receipt.

## What account type is petty cash in QuickBooks?

Petty cash is a **Bank** account with the **Cash on hand** detail type. QuickBooks Online tracks physical currency through its own bank register. Setting it up as a bank account lets you record transfers from your checking account and reconcile the register against the count in the box.

Follow these steps to create the account:

1. Go to **Settings** ⚙ and select **Chart of accounts**.
2. Select **New**.
3. In the **Account type** dropdown, select **Bank**.
4. In the **Detail type** dropdown, select **Cash on hand**.
5. In the **Account name** field, enter “Petty Cash”.
6. Leave the opening balance blank. Anything entered there posts to [Opening Balance Equity](/fixes/opening-balance-equity/), which someone then has to clear. The balance should come from the transfer that funds the box.
7. Select **Save**.

If a box of cash already exists from before the books started, record it as a transfer or deposit from wherever the cash came from, not as an opening balance.

## How to fund and top up the petty cash box

To stock the lockbox for the first time or replenish it after purchases, withdraw funds from your business checking account.

Cash usually reaches the box through an ATM withdrawal. To see how to categorize ATM debits from the bank feed and avoid common tax pitfalls, review our guide on [recording an ATM withdrawal in QuickBooks Online](/fixes/atm-withdrawal/).

### Step 1: Fund the initial float

Suppose you establish a $200.00 petty cash float. You withdraw $200.00 from checking. Record this in QuickBooks using either a check or a transfer:

- **Transfer:** select **\+ New** (shown as **\+ Create** in newer layouts), then **Transfer**. Transfer from the checking account to **Petty Cash**, enter $200.00, and save.
- **Check:** if the box is funded with a check cashed at the bank, write the check from checking. Intuit’s help article names Petty Cash as the payee; what matters is the line below it, where the **Category** must be the **Petty Cash** account. The category is what moves the money. A check with “Petty Cash” only in the payee field and an expense category books the whole $200 as an expense.
- **Bank feed:** if the cash came from an ATM withdrawal, record that line in the bank feed as a transfer to Petty Cash rather than entering a second transaction by hand.

The double-entry journal entry debits one current asset and credits another:

| Account | Debit | Credit |
| :--- | :--- | :--- |
| Petty Cash | 200.00 | 0.00 |
| Business Checking | 0.00 | 200.00 |

### Step 2: Record everyday cash purchases

Whenever someone spends money from the box, require an itemized receipt. IRS Publication 583 says to keep supporting documents that show the amount paid and that it was for a business expense, and a receipt is the only one a cash purchase produces.

To record cash spent from the drawer:

1. Select **\+ Create**, then select **Expense**.
2. In the **Payee** field, select or add the vendor.
3. In the **Payment account** dropdown, select **Petty Cash**.
4. Enter the purchase date and payment method as **Cash**.
5. Under **Category details**, assign the appropriate expense category (such as Office Supplies or Postage and Delivery).
6. Enter the amount and attach a scan of the receipt.
7. Select **Save and close**.

Each expense entry credits Petty Cash and debits the expense category, reducing the register balance to match the cash removed.

### Step 3: Top up the cash drawer

When the cash runs low, total the receipts, make sure each one is entered, and move that exact amount from checking with another transfer to Petty Cash. The register is back at the float, and so is the box.

## What is the journal entry for petty cash?

Petty cash takes three entries. Only the second one touches the profit and loss.

| Event | Debit | Credit |
| --- | --- | --- |
| Fund the box, $200 | Petty Cash 200.00 | Checking 200.00 |
| Spend $24.50 on postage | Postage and Delivery 24.50 | Petty Cash 24.50 |
| Top up the box by $77.75 | Petty Cash 77.75 | Checking 77.75 |

## A worked month of petty cash transactions

One month of a $200.00 float:

1. **Oct 01:** Initial funding of $200.00 transferred from checking.
2. **Oct 08:** Certified mail postage voucher paid in cash for $24.50.
3. **Oct 15:** Emergency printer paper purchased from an office store for $38.25.
4. **Oct 22:** Parking for a client meeting, $15.00.
5. **Oct 28:** Top-up transfer of $77.75 (the sum of the three receipts) restores the $200.00 float.
6. **Oct 31:** Month-end physical cash count confirms exactly $200.00 in the lockbox.

| Date | Transaction | Account | Out | In | Register balance | Receipts in box |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Oct 01 | Opening transfer | Business Checking | | 200.00 | 200.00 | 0.00 |
| Oct 08 | Certified mail | Postage and Delivery | 24.50 | | 175.50 | 24.50 |
| Oct 15 | Printer paper | Office Supplies | 38.25 | | 137.25 | 62.75 |
| Oct 22 | Parking | Travel | 15.00 | | 122.25 | 77.75 |
| Oct 28 | Top-up transfer | Business Checking | | 77.75 | 200.00 | 0.00 |

On every row, the register balance plus the receipts in the box equals $200.00. If a count ever breaks that, a receipt is missing or cash left without one.

## How to reconcile a petty cash account in QuickBooks Online

Because Petty Cash is set up with Account type **Bank**, you reconcile it using the standard QuickBooks reconciliation tool. Regular reconciliations confirm that every receipt was recorded and that no money went missing. For a broader overview of reconciliation mechanics and templates, see our guide on [bank reconciliation explained](/blog/bank-reconciliation-explained/).

To reconcile the petty cash drawer at month end:

1. Count the physical cash and coins in your lockbox. This count is your ending balance.
2. Go to **Settings** ⚙ and select **Reconcile** (or select **Accounting** > **Reconcile**).
3. In the **Account** dropdown, select **Petty Cash**.
4. In the **Ending balance** field, enter the dollar amount of your physical count.
5. In the **Ending date** field, enter the last day of the reconciliation period.
6. Select **Start reconciling**.
7. Tick every expense and top-up transfer dated in the period.
8. Verify that the **Difference** field shows **$0.00**.
9. Select **Finish now**.

## How to fix a petty cash balance nobody can find

A common cleanup finding is a Petty Cash account carrying a balance of a thousand dollars or more when the box holds a few bills, or no longer exists.

It happens when withdrawals were coded to Petty Cash for months or years, but nobody recorded what the cash was spent on.

To clear this phantom balance, verify the real cash on hand, enter any missing receipts, and write off the remaining gap.

### Step 1: Count physical cash and search for receipts

Count the bills and coins currently in the drawer. If the box holds $50.00 and the register shows $1,250.00, your unexplained variance is $1,200.00. Gather any unentered receipts from recent weeks and record them as expenses paid from Petty Cash to narrow the gap.

### Step 2: Write off the remaining discrepancy

Any variance that cannot be supported with receipts must be removed from the asset account using a journal entry:

#### Minor shortage in the current open period

If a count comes up a little short and no receipt turns up, write the difference off to an expense account such as **Cash Short and Over**:

1. Select **\+ Create**, then select **Journal entry**.
2. Enter the current date.
3. On line 1, debit **Cash Short and Over** (Expense account) for the shortage amount.
4. On line 2, credit **Petty Cash** for the same amount.
5. Enter a memo noting the count adjustment, then select **Save and close**.

| Account | Debit | Credit |
| :--- | :--- | :--- |
| Cash Short and Over | 12.00 | |
| Petty Cash | | 12.00 |

#### Large unverified balance taken by the owner

A large balance with no receipts behind it is usually cash the owner took. An expense with no record of what it paid for is hard to support as a deduction, so the usual treatment is to move it to equity as a draw. Agree that with the owner and their tax preparer first:

- For a sole proprietorship, single-member LLC, or partnership, debit **Owner’s Draw** (or Partner Distributions).
- For an S-corporation shareholder, debit **Shareholder Distributions**.

| Account | Debit | Credit |
| :--- | :--- | :--- |
| Owner’s Draw | 1,200.00 | 0.00 |
| Petty Cash | 0.00 | 1,200.00 |

This clears the balance from the balance sheet without claiming a deduction nobody can support.

## What to check before writing off a petty cash balance

Before saving any adjusting journal entries, review these three controls:

1. **Reconciliation status in the register.** Go to **Settings** ⚙ > **Chart of accounts** and select **View register** on Petty Cash. If historical transactions show an **R**, they were reconciled. Never delete or alter a reconciled line, as doing so alters your beginning reconciliation balance.
2. **Prior tax filings and closing dates.** Under **Settings** ⚙ > **Account and settings** > **Advanced** > **Accounting**, check whether **Close the books** is enabled. If the phantom balance accumulated across prior tax years, do not post write-off entries to prior dates. Post the adjusting entry in the current open period to avoid shifting historical retained earnings.
3. **Internal custody procedures.** Designate one custodian with a single key. If multiple employees take cash without leaving slips, the drawer will drift out of balance again within weeks.

## What this costs to fix

Reconciling a recent petty cash drawer with valid receipts takes under an hour. But when petty cash has sat unmonitored for multiple years, accumulated thousands of dollars in unsubstantiated withdrawals, or caused discrepancies across closed periods, resolving it requires a formal [QuickBooks cleanup](/quickbooks-cleanup/).

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If your balance sheet shows an unresolved petty cash balance that does not match the money in your office, [send the file for a free review](/contact/?from=fixes%2Fpetty-cash) before attempting write-off entries.

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Updated October 12, 2026 · [Omkar Moraye](/about/)

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