Question

A $200 petty cash fund has cash of $32 and receipts of $172. The journal entry to replenish the account would include:

a) Debit to cash for $168
b) Credit to petty cash for $168
c) Credit to cash over and short for $4
d) Credit to cash for $172

Answer 1

The correct replenishment of the petty cash would involve a credit to cash for $168, not the options provided in the student's question. Additionally, the bank's balance sheet with a net worth calculation is demonstrated, showing a net worth of $220 after subtracting total liabilities from total assets.

Step-by-step explanation:

To replenish the petty cash fund, you would record the amounts spent according to the receipts and any cash shortages or overages. The petty cash fund has a set balance, so you are restoring it to that initial balance by recording the expenses. In this scenario, the fund has cash of $32 and receipts for $168, which account for the expenditures from the petty cash.

The journal entry would be a debit to various expense accounts totaling $168, based on the receipts, and a credit to cash for $168. There is no mention of a cash over or short situation, so we do not use option c. The correct option from the student's question is not provided based on the information given - there is no need to debit cash because we are not increasing the amount of cash on hand; instead, we are reducing the cash held by the bank account when we credit it to replenish petty cash.