Question

On April 7, Mary decided to use a petty cash fund for her small business. A cheque of $140 was issued and cashed. The $140 cash was given to the store supervisor who was to act as petty cashier. The petty cashier was told to obtain authorized vouchers for all payments. Petty cash was to be replenished when the balance in the cash box reached $20.

a) Record the establishment of the fund on April 7.

b) On April 19, this summary was prepared:

Advertising Expense $49.00
Maintenance Expense $17.00
Office Supplies Expense $32.00
Postage Expense $22.00
Total $120.00
Prepare the entry to replenish the petty cash.

c) On April 23, it was decided to increase the amount of the petty cash fund from $140 to $220. A cheque of $80 was issued. Record the transaction.

Do not enter dollar signs or commas in the input boxes.

a)

Date Account Title and Explanation Debit Credit
2016
Apr 7 Answer
Answer

Answer
Answer
Set up the petty cash fund

b)
Enter the debit accounts in alphabetical order.


Date Account Title and Explanation Debit Credit
2016
Apr 19 Answer
Answer

Answer
Answer

Answer
Answer

Answer
Answer

Answer
Answer
Replenish the petty cash fund

c)

Date Account Title and Explanation Debit Credit
2016
Apr 23 Answer
Answer

Answer
Answer
Increase the petty cash float


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Answer 1

Mary set up a petty cash fund with a $140 float to cover minor expenses and demanded vouchers for all expenses. When replenished at $20, this mirrors banking practices, where banks like Singleton lend money, hold required reserves, and can loan out the rest.

Step-by-step explanation:

On April 7th, Mary implemented a petty cash fund for her small business by issuing a $140 check, which was cashed and handed to the store supervisor to act as petty cashier. It is expected that the petty cashier secure authorized vouchers for all disbursements. The system is designed to replenish the petty cash when the balance drops to $20. This initial amount of $140 is referred to as the petty cash float, and it serves as a small fund on hand to cover minor expenses without the need for writing checks for small amounts. Proper petty cash management is crucial for controlling small expenditures and maintaining accurate accounting records.

Relating this concept to the banking scenario, a bank issues a cashier's check, as seen when Singleton Bank lends $9 million to Hank's Auto Supply. Hank's Auto Supply deposits the $9 million, which increases the reserves of First National Bank. First National is then obligated to hold 10% of the deposit as required reserves, while the rest can be loaned out again, demonstrating how banks create money through the lending process.