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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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(Appendix 6.1) On June 1, Snow Company established a petty cash fund of $1,000 to pay for various office supplies. A count at the end of the month shows $325 remaining in the fand, while the vouchers indicate that $650 of costs were incurred. Prepare the journal entries to establish the petty cash fund on June 1 and replenish the fund on June 30.

To determine

Record journal entries to establish the petty cash fund during June 1 and replenish the fund on June 30.

Explanation

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  •  Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  •  Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Prepare journal entries:

DateAccount Titles and ExplanationDebit ($)Credit($)
    
June 1Petty Cash1,000 
     Cash 1,000
( To record the establishment of fund)  
    
June 30Office supplies Expense650 
 Cash Short and Over25 
      Cash (1) 675
 (To record the recognition of expenses)  

Table (1)

To record the establishment of fund:

  • Petty cash is an asset account and it is increased...

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