Question

On June 1, Farm Grown Salad Dressings creates a petty cash fund with an imprest balance of $600. During June, Sunny Lewis, the fund custodian, signs the following petty cash tickets: (Click the icon to view the petty cash tickets.) On June 30, prior to replenishment, the fund contains these tickets plus cash of $295. The accounts affected by petty cash payments are Office Supplies, Travel Expense, Delivery Expense, Entertainment Expense, and Merchandise Inventory Read the requirements Requirement 1. Explain the characteristics and the internal control features of an imprest fund. An imprest fund has balance at all times, which equals the sum of plus the that support payments from the fund. The internal control feature of an imprest fund is that it the amount of money for which the fund custodian is responsible

Answer 1

Answer-1:

Characteristics and internal control features of an imprest system:

⦁ As per imprest system, invariable balance need to be maintained in the petty cash account.

⦁ The total amount of cash and expenses that are made out of the petty cash should be equal to the amount allocated in the petty cash fund.

⦁ Custodian of the petty cash fund becomes responsible for the petty cash amount in the fund.

Answer-2:

	$
Imprest balance (a)	600
Office supplies	25
Travel expense	30
Delivery expense	50
Entertainment expense	100
Merchandise inventory	105
Total payment (b)	310
Petty cash balance before replenishment (a) - (b)	290

Answer-3:

Date	Account Title & Explanation	Debit	Credit
Jun.01	Petty cash	$          600
	Cash		$           600
	(to record the petty cash fund)
Jun.30	Office supplies	25
	Travel expense	30
	Delivery expense	50
	Entertainment expense	100
	Merchandise inventory	105
	Cash (310-5)		305
	Cash over		5
	(to replenish a petty cash fund)

Answer-4:

Date	Account Title & Explanation	Debit	Credit
Jul.01	Petty cash (650-600)	$50
	Cash		$50
	(to increase the balance of petty cash)

Furthermore, the custodian keeps the receipt of the expenses and present the same to his/her supervisor to prove the accuracy of the petty cash balance upon the supervisor's inspection.