Question

In: Accounting

a company sets up a petty cash fund of $200 on January 1, 2009 on January...

a company sets up a petty cash fund of $200 on January 1, 2009 on January 31, 2009, they decide to replenish the fund. They note that the petty cashier has $13.75 in cash on hand at January 31 and receipts as follows:

Expense 1: $17.00, Expense 2: $167, Expense 3: $89.50, Expense 4: $24.00

assuming all expenses are considered legitimate, record the establishment of the petty cash fund and then record the replenishment at the end of the month.

Solutions

Expert Solution

In the Given Question, If all expenses ($297.50) are paid by petty cashier then, Petty Cash book Shown a Negative balance of $97.50 (200-297.50). However, As per the given information there was a balance of $ 13.75 at the ednd of the month. There are two following causes:

1. out of Expenses $297.50, only $186.25 have been paid and balnce is still remains unpaid.

2. There is any error in the given information.

Assuming the $186.25 have been paid by petty cashier and he has balance $ 13.75. It is assumed the expenses are paid on FIFO Basis.

Journal Entry for Replishment of Petty Cash

Date Account Name Debit ($) Credit ($)
01.01.2020 Expense 1        17.00
Expense 2      167.00
Expense 3          2.25
Cash       186.25
(Being Replishment of Petty Cash to maintain a Balance of $ 200)

Expense 3 payable amounts to $ 87.25 and Expense 4 Payable amounts to $24.


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