Chapter 7, Problem 6SEA

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Chapter
Section

College Accounting, Chapters 1-27

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

PETTY CASH JOURNAL ENTRIES Based on the following petty cash information, prepare (a) the journal entry to establish a petty cash fund and (b) the journal entry to replenish the petty cash fund.On January 1, 20--, a check was written in the amount of \$300 to establish a petty cash fund. During January, the following vouchers were written for cash removed from the petty cash drawer:

To determine

Prepare journal entry to record (a) establishment a petty cash fund (b) to replenish the petty cash fund.

Explanation

Petty cash fund:

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

(a) Prepare journal entry to record establishment a petty cash fund.

 Date Account Titles and explanation Post. Ref. Debit (\$) Credit (\$) January 1 Petty cash Â 300 Â Â Â Â Â Â  Cash Â Â 300 Â (To establish theÂ  petty cash fund) Â Â Â

Table (1)

• â€¢ Petty cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by \$300.
• â€¢ Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by \$300.

(b) Prepare journal entry to record to replenish the petty cash fund.

 Date Account Titles and explanation Post. Ref. Debit (\$) Credit (\$) January 31 Phone expenseÂ Â 21.20 Â Â Automobile expense Â 39.60 Â Â Person J Drawings Â 85.00 Â Â Postage expense Â 15...

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