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Controlling petty cash Just Hangin’ Night Club maintains an imprest petty cash fund of \(150, which is under the control of Sandra Morgan. At March 31, the fund holds \)14 cash and petty cash tickets for office supplies, \(128, and delivery expense, \)15.

Requirements

1. Explain how an imprest petty cash system works.

2. Journalize the establishment of the petty cash fund on March 1 and the replenishing of the fund on March 31.

3. Prepare a T-account for Petty Cash and post to the account. What is the balance of the Petty Cash account at all times?

Short Answer

Expert verified

The cash account is credited with $136.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of delivery expense

The delivery expense means the expense that is paid for the delivery.

02

Imprest system

The imprest system is a system that is used to maintain the balance of the petty cash fund. In this, cash plus petty cash equals the petty cash fund balance. This system works by adding the cash plus petty cash tickets to check the petty cash fund accuracy. If there is any difference between the petty cash fund balance and cash plus petty cash fund, then the custodian is responsible for this. Hence, this is the working of the imprest petty cash system.

03

Journal entries for a petty cash fund

Date

Particulars

Debit

Credit

Petty Cash Fund

$150

Cash

$150

(Journal entry for the creation of petty cash fund)

Office Supplies

$128

Delivery Expenses

$15

Cash Short & Over

$7

Cash

$136

(Being journal entry for replenishing petty cash fund)

04

T-accounts


Petty Cash

Bal.

$150

Office supplies

$128

Delivery Expense

$15

End. Balance

$7

The balance of the petty cash is $7 all time.

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Most popular questions from this chapter

Accounting for petty cash transactions

Suppose that on September 1, Cool Gyrations, a disc jockey service, create a petty

cash fund with an imprest balance of \(350. During September, Ruth Mangan, fund

custodian, signs the following petty cash tickets:

Petty Cash

Ticket Number Item Amount

1 Postage for package received \) 25

2 Office party 10

3 Two boxes of stationery 20

4 Printer cartridges 15

5 Business dinner 65

On September 30, prior to replenishment, the fund contains these tickets plus cash of

\(210. The accounts affected by petty cash payments are Office Supplies, Entertainment

Expense, and Postage Expense.

Requirements

1. On September 30, how much cash should this petty cash fund hold before it is

replenished?

2. Journalize all required entries to (a) create the fund and (b) replenish it. Include

explanations.

3. Make the entry on October 1 to increase the fund balance to \)425. Include an

Explanation

List some examples of timing differences, and for each difference, determine if it would affect the book side of the reconciliation or the bank side of the reconciliation.

What are the steps taken to ensure control over purchases and payments by check?

Preparing a bank reconciliation and journal entries

This problem continues the Crystal Clear Cleaning problem begun in Chapter 2 and

continued through Chapter 6.

In March 2019, Crystal Clear Cleaning opened a new checking account at First

Regional Bank. The bank statement dated March 31, 2019, for Crystal Clear

Cleaning follows:

Beginning Balance, March 1, 2019

Deposits and other credits:

Mar. 2

10

18

20

23 EFT Peg’s Restaurant(1)

(1) Peg’s Restaurant is a customer making a payment on account.

(3) Texas Energy is a utility provider.

(2) Check Art is a company that prints business checks (considered a

bank expense) for Crystal Clear Cleaning.

\(33,000

900

19,000

50,000

350

Checks and other debits:

Mar. 2 EFT to Check Art(2)

Ending balance, March 31, 2019

\) 0

31 Interest Revenue 50

5 Ck#235

9 Ck#237

9 Ck#236

26 Ck#239

10

2,400

1,500

2,900

2,000

28 EFT to Texas Energy(3) 130

29 Ck#240 300

31 Bank service charge 25

103,300

(9,265)

$ 94,035

Crystal Clear Cleaning’s Cash account in the general ledger shows the following

transactions for March:

Cash—First Regional Bank Checking Account

Balance

Deposit

Deposit

Deposit

Deposit

2,400

2,900

1,500

400

2,000

94,870

Mar. 2

10

18

20

31 Deposit

33,000

900

19,000

50,000

1,770

Mar. 2

4

5

10

21

Ck#235

Ck#236

Ck#237

Ck#238

Ck#239

300

300

23

29

Ck#240

Ck#241

Balance

Requirements

1. Prepare the bank reconciliation at March 31, 2019.

2. Journalize any required entries from the bank reconciliation. Post to the CashT-account to verify the balance of the account matches the adjusted book balancefrom the bank reconciliation.

Fill in the missing information.

a. The vendor ships the inventory and sends a(n) __________ back to the purchaser.

b. After approving all documents, the purchaser sends a(n) __________ to the vendor.

c. When ordering merchandise inventory, the purchaser sends a(n) __________ to the vendor.

d. The purchaser receives the inventory and prepares a(n) __________.

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