Question

Waupaca Company establishes a \(350 petty cash fund on September 9. On September 30, the fund shows \)104 in cash along with receipts for the following expenditures: transportation-in, \(40; postage expenses, \)123; and miscellaneous expenses, \(80. The petty cashier could not account for a \)3 shortage in the fund.

The company uses the perpetual system in accounting for merchandise inventory. Prepare (1) the September 9 entry to establish the fund. (2) the September 30 entry to reimburse the fund.(3) an October 1 entry to increase the fund to $400.

Short answer

Answer

1. Petty cash is debited by $350, and cash is credited by $350.

2. The remaining cash balance in the Petty Cash is $104, and the total expenses, including unrecorded expenses, are $246.

3. The petty cash fund was created with $350, and to increase the fund to $400, $50 needs to be debited in the Petty cash account.

Step-by-step solution

Step-by-Step SolutionStep 1: Introduction to topic

Petty Cash: A small part of an organization's cash regularly kept to pay minor expenses is a petty cash fund.

Journal of case 1

Date	Transactions	Debit($)	Credit($)
Sep 8	Petty Cash	350
	Cash		350
	To record establishment of funds

Journal of case 2

Date	Transactions	Debit($)	Credit($)
Sep 30	Merchandise Inventory	40
	Postage expenses	123
	Miscellaneous expenses	80
	Cash Short or over	3
	Cash		246
	To record reimbursement of the fund.

Journal of case 3

Date	Transactions	Debit($)	Credit($)
Oct 1	Petty Cash	50
	Cash		50
	To record increasing the funds