/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q25PSA Accounting for petty cash transa... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 7: Q25PSA (page 420)

Accounting for petty cash transactions

On June 1, Fab Salad Dressings creates a petty cash fund with an imprest balance of

\(300. During June, Al Franklin, the fund custodian, signs the following petty cash tickets:

Petty Cash

Ticket Number Item Amount

101 Office supplies \) 30

102 Cab fare for executive 20

103 Delivery of package across town 50

104 Business dinner 40

105 Merchandise inventory 90

On June 30, before replenishment, the fund contains these tickets plus cash of \(90.

The accounts affected by petty cash payments are Office Supplies, Travel Expense,

Delivery Expense, Entertainment Expense, and Merchandise Inventory.

Requirements

1. Explain the characteristics and the internal control features of an imprest fund.

2. On June 30, how much cash should the petty cash fund hold before it isreplenished?

3. Journalize all required entries to create the fund and replenish it. Includeexplanations.

4. Make the July 1 entry to increase the fund balance to \)375. Include an explanationand briefly describe what the custodian does.

Short Answer

Expert verified

The cash account is credited with $210 in the replenishment of the petty cash fund.

Step by step solution

01

Definition of the petty cash fund

A petty cash fund is a fund that is created to meet small expenses.

02

Features and characteristics of an imprest fund

Feature of an imprest fund:

  1. Imprest fund is a small cash fund used to pay incidental expenses.
  2. The balance of the imprest fund is stored in the box or drawer.
  3. When the expense payment is made, the fund鈥檚 cash is replaced with an expense voucher.

Characteristics of an imprest fund:

  1. The Imprest fund contains the same balance at all times. The balance of the imprest cannot be changed unless the amount allotted to the petty cash fund changes. During the transaction, the cash account is credited, and the balance of the imprest fund is not changed.
  2. During the payment of the incidental expense, the cash fund is replaced with the expense invoice. Due to this, the fund balance is equal to the tickets.
  3. As you know, the fund鈥檚 balance cannot change unless the limit of the fund changes. The custodian has the information on the amount available in the fund for expenditures. This will help in fixing the responsibility,
03

Cash petty cash fund should hold

Fund Balance

$300

Less:

Office Supplies

$30

Delivery Expenses

$50

Cab fare

$20

Business Dinner

$40

Merchandise Inventory

$90

Petty cash balance before replenishment

$70

Hence, the petty cash fund holds $70 before the replenishment.

04

Journal entries

Date

Particulars

Debit

Credit

June 1

Petty Cash Fund

$300

Cash

$300

(Journal entry for the creation of petty cash fund)

June 30

Office Supplies

$30

Delivery Expenses

$50

Cab fare

$20

Business Dinner

$40

Merchandise Inventory

$90

Cash Short & Over

$20

Cash

$210

(Being journal entry for replenishing petty cash fund)

The first entry is passed for the creation of the petty cash fund.

In the second journal entry, the entry of the replenishment is passed in which the cash short& over the account is credited with $20 and the cash account credited with $210.

05

Balance in the petty cash fund increased

Date

Particulars

Debit

Credit

July 1

Petty Cash Fund

$375

Cash

$375

(Journal entry for the creation of petty cash fund)

The entry is passed to increase the balance of his petty cash fund.

A custodian is a person who keeps the receipt of expenses and presents these receipts to the supervisor. The following process is followed by the custodian to prove the accuracy of the petty cash fund.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Defining internal control

Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate accounting records.

Requirements

1. Which objective do you think is most important?

2. Which objective do you think the internal controls must accomplish for the business to survive? Give your reason.

Phoenix Restaurants accepts credit and debit cards as forms of payment. Assume Phoenix had $12,000 of credit and debit card

sales on June 30, 2017.

9. Suppose Phoenix鈥檚 processor charges a 2% fee and deposits sales net of the fee. Journalize the sale transaction for the

restaurant.

10. Suppose Phoenix鈥檚 processor charges a 2% fee and deposits sales using the gross method. Journalize the sale transaction for

the restaurant.

Using Excel for a Bank Reconciliation

Download an Excel template for this problem online in MyAccountingLab or athttp://www.pearsonhighered.com/Horngren.

Lori Anders of Wilderness Associates is getting ready to prepare the October bank reconciliation.

The cash balance on the books of Wilderness Associates on October 31 is \(3,546.

Lori reviews the bank statement, and notes the checking account balance at October 31 is \)2,445. The bank statement also

reveals that the bank collected a note receivable on behalf of Wilderness Associates鈥攖he principal was \(1,500 and the interest

was \)15. One customer鈥檚 check for \(29 was returned by the bank for insufficient funds. Two additional items on the bank statement

were the monthly EFT for the utilities, \)250, and the bank service fee of \(12. Lori notes that the cash deposit made on

October 31 of \)3,300 does not appear on the statement, and that three checks totaling $975 had not cleared the bank account

when the bank statement was prepared.

Requirements

1. Prepare the bank reconciliation for Wilderness Associates at October 31, 2018. Format appropriate cells with dollar signs and double

underlines. Use Excel formulas to calculate subtotals and totals.

2. Journalize the entries based on the bank reconciliation. For dollar amounts, use cell references on bank reconciliation

Applying internal control over cash receipts Sandra Kristof sells furniture for McKinney Furniture Company. Kristof has financial problems and takes $650 that she received from a customer. She rang up the sale through the cash register. What will alert Megan McKinney, the controller, that something is wrong?

The following petty cash transactions of Green Golf Equipment occurred in May:

May 1 Established a petty cash fund with a \(200 balance.

31 The petty cash fund has \)18 in cash and \(180 in petty cash tickets that were issued to pay for Office Supplies(\)81), Delivery Expense (\(36), Postage Expense (\)54), and Miscellaneous Expense ($9).

The petty cash custodianreplenished the fund and recorded the expenses.

Prepare the journal entries.
See all solutions

Recommended explanations on Business Studies Textbooks

Managerial Economics

Read Explanation

Project Planning & Management

Read Explanation

Intermediate Accounting

Read Explanation

Introduction to Business

Read Explanation

Nature of Business

Read Explanation

Human 91影视

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.