On May 1,Epo Corporation decides to start a petty cash fund. The company writes

Question

On May 1,Epo Corporation decides to start a petty cash fund. The company writes a $370 check for cash to start the fund. What entry should be made at 5/1 to record this transaction? What effect does this transaction have on the accounting equation? On May 31, the company wants to reimburse the petty cash fund. The fund has $151 cash left in it and receipts for Repairs of $114, Postage of $73, and Meals of $25 What entry should be made at 5/31 to record this transaction? What effect does this transact or have or the accounting equation?

Explanation / Answer

(a) Journal entry:

DR Petty cash fund $730

        Cash                  $730

(To record starting a petty cash fund)

(b)

Assets = Increase $730 (Petty cash fund)

Assets = Decrease $730 (cash)

Liabilties & Equity = No change

(c)

DR Repair    $114

DR Postage $73

DR Meals    $25

         Cash                 $61

         Petty cash fund $151

(To record reimbursement of the cash fund)

(d)

Assets decrease by $61 (Cash).

Assets increase by $151 (Petty cash fund).

Expenses increase by $212 (Equity).

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