Havermill Co. establishes a $460 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $94 for Office Supplies, $179 for merchandise inventory, and $43 for miscellaneous expenses. The fund has a balance of $144. On October 1, the accountant determines that the fund should be increased by $92. The journal entry to record the reimbursement of the fund on September 30 includes a:

Question

Giselle Riggs

Business

4 January, 22:50

Havermill Co. establishes a $460 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $94 for Office Supplies, $179 for merchandise inventory, and $43 for miscellaneous expenses. The fund has a balance of $144. On October 1, the accountant determines that the fund should be increased by $92. The journal entry to record the reimbursement of the fund on September 30 includes a:

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Rodney Villa · Answer 1

Answer: Debit Petty cash $408; Credit Cash $408.

Explanation: Petty cash is a small amount of fund set aside for immediate or urgent minor expenses. In most organizations, there is a limit to the petty cash amount that a business unit can have. And someone is always saddled with the responsibility of managing the fund. It has its business rule in the sense that the amount should not be withdrawn beyond zero balance to throw it into debit.

In the instance of the question, the petty cash is $460 and within September, total expenses of $316 were incurred and paid for, leaving a balance of $144. However, the accountant determines that this cash should be increased by $92 on 1 October, so reimbursement to the fund would be the amount already spent ($316) and the proposed increment ($92), making $408.