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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Ellie Harrod, owner of Harrod’s Dry Cleaners, makes bank deposits in the night depository at the close of each business day. The following information for the last four days of July is available.

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Required

In general journal form, record the cash deposit for each day, assuming that there is a $100 Change Fund.

Check Figure

Cash Short and Over, July 31, $2.85 cash shortage

To determine

Journalize the difference between cash count and cash reported on cash register.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the difference between cash count and cash reported on cash register.

Transaction on July 28:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
July28Cash 893.50 
  Cash Short and Over 1.70 
   Income from Services  895.20
  (Record cash shortage in the revenue earned)   

Table (1)

Description:

  • Cash is asset account. Since the cash collected from sales revenue is recorded, the asset value increased. So, debit the cash account with $893.50.
  • Cash Short and Over is an income statement (expense or revenue) account. The increase (overage) is credited and recorded as Revenue, and decrease (shortage) is debited and recorded as Expense. Hence, debit Cash Short and Over account with $1.70 indicating an expense.
  • Income from Services is a revenue account. Revenues increase the stockholders’ equity value. So, credit Income from Services account with $895.20, indicating an increase in stockholders’ equity.

Working Note:

Compute the cash short and over amount.

Cash (short) and over = {(Cash count–Amount in change fund)Cash recorded on tape}=($993.50–$100.00)$895.20=$893.50$895.20=$(1.70)

Transaction on July 29:

DateAccount Titles and ExplanationsPost. Ref.Debit ($)Credit ($)
July29Cash 975.80 
  Cash Short and Over 1.60 
   Income from Services  977.40
  (Record cash shortage in the revenue earned)   

Table (2)

Description:

  • Cash is asset account. Since the cash collected from sales revenue is recorded, the asset value increased. So, debit the cash account with $975.80.
  • Cash Short and Over is an income statement (expense or revenue) account. The increase (overage) is credited and recorded as Revenue, and decrease (shortage) is debited and recorded as Expense. Hence, debit Cash Short and Over account with $1.60 indicating an expense.
  • Income from Services is a revenue account. Revenues increase the stockholders’ equity value. So, credit Income from Services account with $977.40, indicating an increase in stockholders’ equity.

Working Note:

Compute the cash short and over amount.

Cash (short) and over = {(Cash count–Amount in change fund)Cash recorded on tape}=($1,075.80–$100.00)$977.40=$975

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