Question

Finman Company designated Jill Holland as petty cash custodian and established a petty cash fund of $229. The fund is reimbursed when the cash in the fund is at $11. Petty cash receipts indicate funds were disbursed for office supplies $95 and miscellaneous expense $120.Prepare journal entries for the establishment of the fund and the reimbursement. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

• Entry for Establishing Petty cash fund:

Dr: Petty Cash $ 229

Cr: Cash/bank $229

• Entry for Expense paid out of Petty cash:

Dr: Office Supplies $ 95

Dr: Misc Expense $ 120

Cr: Petty Cash $ 215

• Entry for Reimbursement of Petty cash fund:

Dr: Petty Cash $ 0

Cr: Cash/Bank $ 0

No entry is required at the moment as the petty cash fund balance after the transactions is not below $11 which is the reimbursement limit ($229-$95-$215 = $14)

Step-by-step explanation:

A petty cash fund is a fund established within an entity in order to pay out day to day small expenses out of expenses. It is recognized as an current asset when initially set up and slowly expense out as soon as the money is taken out from it for a specific expense.

Examples: Petty cash payment can be used for below small expenses:

• Postage and stationery
• Meals and entertainment
• Office Supplies
• Conveyance Allowance
• Sundry Expenses etc.