Biscay Bay Boats established a petty cash fund for minor day-to-day expenses. Fo
ID: 2450374 • Letter: B
Question
Biscay Bay Boats established a petty cash fund for minor day-to-day expenses. Following are activities related to this fund. Prepare the necessary journal entries for petty cash.
(1) Established a $500 petty cash fund by writing a check to "cash," cashing the check, and placing the proceeds in a petty cash box entrusted to Herman Jones as custodian.
(2) At the end of the month, the petty cash fund contained remaining cash of $127, and receipts for $65 postage, $123 office supplies, and $180 gasoline for company vehicles. Herman is not sure why the fund is short $5. A check payable to cash in the amount of $373 was prepared, and the funds were placed into the box.
(3) At the end of the next month, the petty cash fund contained remaining cash of $35, and receipts for $265 postage, $160 office supplies, and $40 gasoline for company vehicles. A check payable to cash in the amount of $715 was prepared, and the funds were placed into the box. This amount reimburses the fund and increases its balance to $750.
Explanation / Answer
Debit Petty cash A/c $500
Credit Bank A/c. $500
(being the amount of petty cash funded from the Bank a/c.)
Debit Postage A/c $65
Debit Office supplies A/c. $123
Debit Consumables $180
Debit Suspense A/c. $ 5
Credit Petty Cash A/c. $373
(being the amount incurred for postage,office supplies and gasoline (consumables) and the balance of $5 incurred not known for which a/c it is incurred placed in suspense a/c; the balance would come down to $127 )
Debit Petty cash $373
Credit Bank A/c. $373
(being the amount incurred from petty cash re-imbursed from the main a/c.On this ,the total balance in petty cash
would raise to $500 ).
Debit Postage A/c. $265
Debit Office supplies A/c $160
Debit Consumables A/c. $ 40
Credit Petty cash A/c. $465
(being amount incurred from petty cash a/c. for postage,office supplies and consumables (gasoline for office vehicle.After incurring these expenses, the petty cash would come donw to $35 ).
Debit Petty cash A/c. $715
Credit Bank A/c. $715
( being the amount transferred from Bank A/c.to petty cash a/c.On this entry , the account balance remaining in petty cash will reach to $750 )
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