Question

Willard company established a $410 petty cash fund on september 9, 2023. on september 30, the fund had $163.40 in cash along with receipts for these expenditures: transportation-in. $33.30; office supplies, $116.50; and repairs expense, $89.80. willard uses the perpetual method to account for merchandise inventory. the petty cashier could not account for the $7.00 shortage in the fund.

a. prepare the september 9 entry to establish the fund.
b. prepare the september 30 entry to reimburse the fund.
c. prepare an October 1 entry to increase the fund to $460.

Answer 1

a. On September 9, 2023, Willard Company established a petty cash fund with the following entry:

Petty Cash $410

Cash $410

b. On September 30, 2023, the reimbursement entry for the petty cash fund is as follows:

Transportation-In $33.30

Office Supplies $116.50

Repairs Expense $89.80

Cash $163.40

c. On October 1, 2023, the entry to increase the petty cash fund to $460 is:

Petty Cash $50

Cash $50

Step-by-step explanation:

a. To establish the petty cash fund on September 9, 2023, Willard Company debits the Petty Cash account and credits the Cash account for the amount of $410. This initial funding is essential for covering small, miscellaneous expenses without having to use regular checking accounts.

b. On September 30, 2023, the petty cash fund is reimbursed. The expenses incurred—Transportation-In, Office Supplies, and Repairs Expense—are debited, and Cash is credited for the total amount of $163.40. This replenishes the fund for future expenditures.

c. On October 1, 2023, an additional amount of $50 is added to the petty cash fund to increase its total to $460. This adjustment ensures that the petty cash fund remains adequately funded to meet ongoing miscellaneous expenses. The entry involves a debit to the Petty Cash account and a credit to the Cash account.

In summary, these entries illustrate the establishment, reimbursement, and subsequent increase of the petty cash fund, showcasing the meticulous accounting required to manage and document small cash transactions efficiently.