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Petty cash fund Prepare journal entries for each of the following: A. Issued a check to establish a petty cash fund of $600. B. The amount of cash in the petty cash fund is $130. Issued a check to replenish the fund, based on the following summary of petty cash receipts: store supplies, $410, and miscellaneous selling expense, $50. Record any missing funds in the cash short and over account.

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Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
Chapter 7, Problem 7.4BE
Textbook Problem
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Petty cash fund

Prepare journal entries for each of the following:

A. Issued a check to establish a petty cash fund of $600.

B. The amount of cash in the petty cash fund is $130. Issued a check to replenish the fund, based on the following summary of petty cash receipts: store supplies, $410, and miscellaneous selling expense, $50. Record any missing funds in the cash short and over account.

To determine

Petty cash fund: Petty cash fund is a fund established to pay insignificant amounts like postage, office supplies, and lunches. In day-to-day life, it becomes difficult to use checks for daily expenses. Therefore, companies maintain some minimum amount of funds in the hand for such daily expenses. These funds are called as petty cash funds. These funds are managed by custodian. This system is otherwise called as imprest system.

To prepare: Journal entry for petty cash fund.

Explanation of Solution

(a)

Journal entry: Establish petty cash fund.

Date Accounts and Explanation Post Ref Debit ($) Credit ($)
  Petty Cash (A+)   600  
    Cash (A–)     600
      (To record the creation of petty cash fund.)      
             

Table -1

Petty Cash is an asset and is increased by $600. Hence, Petty Cash account is debited with $600. Cash is an asset and is decreased by $600 due to establishment of petty cash fund. Thus, Cash account is credited with $600.

(b)

Journal entry: Replenishment of petty cash fund.

Date Accounts and Explanation Post Ref Debit ($) Credit ($)
  Store supplies   410  
  Miscellaneous selling expenses   50  
  Cash short and over   10  
     Cash     470
      (To record the replenishment of petty cash fund...

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Chapter 7 Solutions

Financial & Managerial Accounting
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