Final answer:
To increase company X's petty cash fund from $200 to $250, a journal entry debiting Petty Cash for $50 and crediting Cash or Bank for $50 is necessary.
Step-by-step explanation:
The student's question is about adjusting the balance of a petty cash fund in company X's accounting records. When a company wishes to increase its petty cash fund, the necessary journal entry would typically involve debiting the petty cash account and crediting cash or the bank account from which the funds are withdrawn.
For company X's increase from $200 to $250, the journal entry would be:
- Debit: Petty Cash $50
- Credit: Cash (or Bank) $50
This entry reflects the additional $50 being added to the petty cash fund.
Relevance of Petty Cash Transactions
Handling Petty Cash in a business is an important aspect of cash management. The increase or decrease in Petty Cash must be accurately recorded to ensure that cash balances are correctly stated for both internal control and financial reporting purposes.