Question

Petty Cash Fund

Prepare journal entries for each of the following. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Issued a check to establish a petty cash fund of $450.

b. The amount of cash in the petty cash fund is $140. Issued a check to replenish the fund, based on the following summary of petty cash receipts: store supplies, $182 and miscellaneous selling expense, $115. Record any missing funds in the cash short and over account. For a compound transaction, if an amount box does not require an entry, leave it blank.

Petty Cash Fund

Prepare journal entries for each of the following. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Issued a check to establish a petty cash fund of $450.

b. The amount of cash in the petty cash fund is $140. Issued a check to replenish the fund, based on the following summary of petty cash receipts: store supplies, $182 and miscellaneous selling expense, $115. Record any missing funds in the cash short and over account. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

The term petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a cheque.

Petty Cash will remain dormant at a constant amount. If the amount of petty cash is $100, then the Petty Cash account will always report a debit balance of $100. When the currency and coins on hand gets low, the petty cash custodian will request a check to replenish the coins and currency that were disbursed. Since the requested check is drawn on the organization's checking account,the Cash account (not the Petty Cash account) will be credited.

a)

The entry to create a petty cash fund with $450, the following entry is passed;

	Debit	Credit
Petty cash	$450
To Cash Account		$450

b) The total expenses as per receipts are, 182+115=297.

The balance of petty cash should have been 450-297=$153.

But the balance available in the petty cash fund is $140, which is short by $13 (153-140).

We need to replenish the fund with $ 310. (Substracting available fund $140 from the original fund $450)

The difference in the fund due to error, is treated just like an expense and debit is given to an account called ''cash over and short"

The debit is given to the expenses and credit to cash account.Note that the entry to record replenishing the fund does not credit the Petty Cash account.

Entry will be;

Store supplies	$182
Miscellaneous expenses	$115
Cash over and short	$13
To Cash Account		$310