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Chapter 7: Q4TI (page 393)

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.

Short Answer

Expert verified

The petty cash fund account is debited with $200, and the cash account is credited with $200.

Step by step solution

01

Definition of petty cash fund

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

02

Journal entries

Date

Particulars

Debit

Credit

May 1

Petty Cash Fund

$200

Cash

$200

(Being to for establishment of petty cash fund)

May 1

Office Supplies

$81

Delivery Expense

$36

Postage Expenses

$54

Miscellaneous Expense

$9

Cash Short & Over

$2

Cash

$182

(Entry for the replenishment of petty cash fund

The first entry is passed on recording the establishment of the petty cash fund.

The second entry is passed for the replenishment of the petty cash fund.

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Most popular questions from this chapter

List internal control procedures related to e-commerce.

Identifying internal controls. Consider each situation separately. Identify the missing internal control procedure from these characteristics:

鈥� Assignment of responsibilities

鈥� Separation of duties

鈥� Audits

鈥� Electronic devices

鈥� Other controls (specify)

a. While reviewing the records of Quality Pharmacy, you find that the same Team member orders merchandise and approves invoices for payment.

b. Business is slow at Amazing Amusement Park on Tuesday, Wednesday, and Thursday nights. To reduce expenses, the business decides not to use a ticket taker on those nights. The ticket seller (cashier) is told to keep the tickets as a record of the number sold.

c. The same trusted team member has served as a cashier for 12 years.

d. When business is brisk, Fast Mart deposits cash in the bank several times during the day. The manager at one store wants to reduce the time employees spend delivering cash to the bank, so he starts a new policy. Cash will build up over weekends, and the total will be deposited on Monday.

e. Grocery stores such as Convenience Market and Natural Foods purchase most merchandise from a few suppliers. At another grocery store, the manager decides to reduce paperwork. He eliminates the requirement that the receiving department prepare a receiving report listing the goods actually received from

the supplier.

Classifying bank reconciliation items

The following items could appear on a bank reconciliation:

a. Outstanding checks, \(670.

b. Deposits in transit, \)1,500.

c. NSF check from customer, no. 548, for \(175.

d. Bank collection of note receivable of \)800, and interest of \(80.

e. Interest earned on bank balance, \)20.

f. Service charge, \(10.

g. The business credited Cash for \)200. The correct amount was \(2,000.

h. The bank incorrectly decreased the business鈥檚 account by \)350 for a check written

by another business.

Classify each item as (1) an addition to the book balance, (2) a subtraction from the

book balance, (3) an addition to the bank balance, or (4) a subtraction from the bank

balance.

Accounting for petty cash Jackie鈥檚 Dance Studio created a \(220 imprest petty cash fund. During the month, the fund custodian authorized and signed petty cash tickets as follows: Petty Cash Ticket No. Item Account Debited Amount

1 Delivery of programs to customers Delivery Expense \) 20 2 Mail package Postage Expense 10 3 Newsletter Printing Expense 25 4 Key to closet Miscellaneous Expense 40 5 Copier paper Office Supplies 70

Requirements

1. Make the general journal entry to create the petty cash fund. Include an explanation.

2. Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals \(40. Include an explanation.

3. Assume that Jackie鈥檚 Dance Studio decides to decrease the petty cash fund to \)120. Make the general journal entry to record this decrease.

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.
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