Question

On April 2, Granger Sales decides to establish a $360 petty cash fund to relieve the burden on Accounting. Required:


(a) Journalize the establishment of the fund.

(b) On April 10, the petty cash fund has receipts for mail and postage of $34, contributions and donations of $19, meals and entertainment of $112, and $191 in the ending cash balance. Journalize the replenishment of the fund.

(c) On April 11, Granger Sales decides to increase petty cash to $470. Journalize this event.

Answer 1

Answer:

a) Debit= Petty Cash $360; Credit= Cash= $360

b)Debit    Mail and Postages=$34,

                Contributions and donations= $19,

                Meals and Entertainment= $112,

                Cash Over and Shorts=$4

Credit       Cash= $169

C)Debit= Petty Cash $110; Credit= Cash $110

Explanation:

a) Journalise the establishment of the fund

April 2 Debit Petty Cash    $360

           Credit Cash A/C                   $360

Being the establishment of a petty cash fund

b) Petty Cash Expenditure and Replenishment

April 10  Debit Mail and Postage                    $34

              Debit Contributions and donations $19

              Debit Meals and Entertainment       $112

              Debit Cash Over and Shorts             $4

              Credit Cash A/c                                                 $169

Being the replenishment of Petty Cash fund

Note: The balance of $191 in the ending cash balance means the petty cash already expended $169. However, the addition of Mail, Contributions and Meals = $165, meaning the account is short by $4 and this must be debited as Cash shorts to make up the difference.

c) Increase in Petty Cash to $470

April 11     Debit  Petty Cash          $110

                Credit Cash A/c                     $110

Being the Increase in Petty Cash account by $110 (from $360 to $470)