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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

To establish a petty cash fund, which account is debited?

  1. (a) Cash
  2. (b) Petty Cash
  3. (c) Miscellaneous Expense
  4. (d) Revenue

To determine

Identify the account that must be debited for establishing petty cash fund.

Explanation

Petty cash fund:

Petty cash fund is a fund established to pay insignificant amounts like postage, office supplies, and lunches.

Justification for the incorrect answer:

Option a:

While establishing the petty cash fund, a check is provided to the petty cash custodian for an amount that is set aside for the petty cash fund. While preparing the journal entry petty cash account will be debited and cash account will be credited as the cash is going out while establishing the petty cash fund. Therefore, Option a is an incorrect answer.

Option c:

Miscellaneous expense will be not debited while establishing the petty cash fund because miscellaneous expense is an expense and it will not affect the petty cash fund when it is established. The miscellaneous expenses are debited while replenishing the petty cash fund. Therefore, Option c is an incorrect answer...

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