Question

A cheque is written to replenish a $100 petty cash fund, when the fund contains receipts $90 and $8 in cash. To partially record the transaction:

Select one:
a. Cash should be debited for $90
b. Petty Cash should be debited for $90
c. Petty Cash should be credited for $2
d. Cash Over and Short should be debited for $2

Answer 1

To replenish the petty cash fund to $100, the correct entry is to debit Cash Over and Short for $2. This entry corrects the $2 shortfall in the petty cash fund, taking into account the $90 in receipts and $8 in cash already present.

Step-by-step explanation:

The question involves replenishing a petty cash fund and recording the associated financial transaction. When a cheque is written for $2 to bring the cash up to $100 ($90 in receipts + $8 in cash already in the fund), the correct entry is to debit Cash Over and Short for $2. This addresses the shortfall from the expected fund amount. The petty cash fund should be back to its original amount of $100 after this transaction, with the $90 of receipts accounting for the disbursements and the total cash replenished to $10.