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5 April, 15:43

XYZ Co. decided to create a petty cash fund. They estimated that $100 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below. Petty Cash is credited for $100. Miscellaneous Expense is debited for $100. Cash is debited for $100. Petty Cash is debited for $100.

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  1. 5 April, 15:49
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    Petty cash is debited for $100

    Explanation:

    Petty cash is a small amount of fund which is kept in the business for day to day expenses. Cash is issued from this fund for daily small expense which is not appropriate to withdraw from the bank by check.

    Journal Entry will be as follow

    Dr. Petty cash $100

    Cr. Cash $100

    Cash is transferred from cash account to petty cash account, both of these are asst account and have a debit balance. Tot increase the petty cash account balance it is debited and to decrease the cash account balance it is credited.
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