Q5SE - Horngren'S Financial And Managerial Accounting

Question

Journalizing petty cash

Prepare the journal entries for the following petty cash transactions of Everly Gaming

Supplies:

March 1 Established a petty cash fund with a \(250 balance.

31 The petty cash fund has \)24 in cash and \(235 in petty cash tickets

that were issued to pay for Office Supplies (\)35) and Entertainment

Expense (\(200). Replenished the fund and recorded the expenditures.

April 15 Increased the balance of the petty cash fund to \)300.

Step-by-Step Solution

Answer

The cash account was credited with $300 on April 15.

Step 1: Definition of petty cash fund

A petty cash fund is a fund that is created for small cash transactions.

Step 2: Journal entries

Date	Particulars	Debit	Credit
March 1	Petty Cash	$200
	Cash		$200
	(Opening of petty cash fund)
March 31	Entertainment Expenses	$200
	Office Supplies Expense	$35
	Cash Short & Over		$35
	Cash		$200
	(Replenish the petty cash fund)
April 15	Petty Cash	$300
	Cash		$300
	(Increase the petty cash fund)

In the first entry, the passed is passed for the creation of a petty cash fund in which the petty cash account is debited and the cash account credited.

In the second entry, the entry is passed for replenishing the petty cash fund. In process of the replenishing, it is found that the cash fund has $35.

In the third entry, the entry is passed to record the amount increased in the petty cash fund.