Question

Feb. 2 Wrote a $350 check to establish a petty cash fund.

Feb. 5 Purchased paper for the copier for $14.55 that is immediately used.
Feb. 9 Paid $30.50 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory.
Feb. 12 Paid $8.55 postage to deliver a contract to a client.
Feb. 14 Reimbursed Adina Sharon, the manager, $71 for mileage on her car.
Feb. 20 Purchased office paper for $66.77 that is immediately used.
Feb. 23 Paid a courier $16 to deliver merchandise sold to a customer, terms FOB destination.
Feb. 25 Paid $11.90 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory.
Feb. 27 Paid $57 for postage expenses.
Feb. 28 The fund had $23.61 remaining in the petty cashbox. Sorted the petty cash receipts by accounts affected and exchanged them for a check to reimburse the fund for expenditures.
Feb. 28 The petty cash fund amount is increased by $140 to a total of $490.

Required:
Prepare the journal entry to establish the petty cash fund.

Answer 1

To establish a petty cash fund, a journal entry is made to debit the Petty Cash account and credit the Cash account for the amount of $350, reflecting the initial funding of the fund.

Step-by-step explanation:

To establish a petty cash fund, the journal entry would record a debit to the petty cash account and a credit to the cash account.

Journal Entry:

Date: February 2
Account Debit: Petty Cash $350
Account Credit: Cash $350

This entry reflects the creation of a fund designated for small, incidental expenses. The company writes a $350 check, which means the cash account (an asset account on the balance sheet) is decreased, while the petty cash (also an asset account) is increased by the same amount.