Question

Borrowing from Petty Cash Daniel Brown is in charge of the $250 petty cash fund for Metro Auto Repair Service. When an employee needs a special part that is not in inventory, Daniel takes money from petty cash to buy the part. One day Daniel was short of cash and needed some lunch money. He decided to borrow $10 that he would pay back on payday in three days. Daniel continues this practice for three days for a total of $30. He does not have enough to pay the petty cash back. When he reconciles the petty cash, he records this $30 as a cash short/over expense. This is the first time he has done it. Is this an ethical action? What should Daniel do to fix this problem if there is one?

Answer 1

Is this an ethical action?

What should Daniel do to fix this problem if there is one?

Refer to the below image for more detailed explanation.

Answer: This action is unethical as there will be no special part has bought against $30 and the fact was not disclosed to any other authorized person. Whatever his intentions were the action seems whethical By recording the transaction as cast short means that actual expenses were exceeded from $250o and that is a misrepresentation - Daniel would have to deposit the differential amount $30 to offset the difference and record another correcting entry- - - -