Question

Transactions involving the petty cash fund of Sonar Company are as follows:

Mar. 1 Established a petty cash fund of $ 750, which will be under the control of the assistant office manager.

31 Fund was replenished on this date. Prior to replenishment, the fund consisted of the following:

Coins and currency	$ 491.50
Petty cash voucher indicating disbursements for:
Postage stamps	$82.00
Suppliers money for office employees working overtime	36.00
Office supplies	32.70
Window washing service	60.00
Flowers for wedding employee	15.00
Flower for hospitalized employee	15.00
Employee’s IOU	15.00

Present journal entries for these transactions. Use the Cash Short and Over account for any shortage or overage in the fund.

Answer 1

GENERAL JOURNAL

DATE		ACCOUNT TITLE AND DESCRIPTION	POST REF.	DEBIT	CREDIT
MARCH	1	PETTY CASH		750
		CASH			750
		ESTABLISH PETTY CASH FUND
MARCH	30	POSTAGE STAMPS		82
		OVERTIME TO OFFICE EMPLOYEES		36
		OFFICE SUPPLIES		32.70
		WINDOW WASHING SERVICE		60
		FLOWERS FOR WEDDING EMPLOYEES		15
		FLOWERS FOR HOSPITALIZED EMPLOYEES		15
		EMPLOYEES IOU		15
		CASH OVER AND SHORT		2.8
		CASH			257.8
		REPLENISH PETTY CASH FUND

As we can see, there was an error in handling cash during the month as the sum of vouchers ($255.7) and the remaining petty cash on hand ($491.5) equals $747.2 while the petty cash fund was established at $750. The difference of $2.8 is a cash shortage.A debit in Cash Short and Over represents an expense. Thus the company will have an expense of $2.8, since there was a cash shortage of $2.8.

The balance in Cash Short and Over is reported on the income statement. If the balance is insignificant, the account balance will likely be reported as part of miscellaneous expense. Here Cash Shprt and Over is a sum of $2.8 is to be reported as a miscellaneous expense on the income statement .