Question

A $60 petty cash fund has cash of $23 and receipts of $49. The journal entry to replenish the account would include a:

a) Credit to Cash Short and Over for $12

b) Credit to Cash for $60

c) Debit to Cash for $23

d) Credit to Petty Cash for $49

Answer 1

The correct journal entry to replenish the petty cash involves crediting Cash Short and Over for $12, which accounts for the overage calculated by adding the available cash and receipts, then comparing to the initial petty cash amount.

Step-by-step explanation:

Credit to Cash Short and Over for $12.

The petty cash fund needs to be replenished for the amount of the receipts, which totals $49. Since the fund currently has $23 in cash, you would need an additional $26 ($49 - $23) to replenish it to the original amount of $60. However, there is an overage because the cash on hand ($23) and the receipts ($49) total $72, which is $12 more than the starting fund amount. This overage is recognized as a credit to Cash Short and Over.

The journal entry to replenish the petty cash fund would be:

• Debit various expenses for $49 (total amount of receipts).
• Credit Cash for $37 (the amount needed to bring the fund back to $60).
• Credit Cash Short and Over for $12 (the overage amount).