Havermill Co. establishes a $350 petty cash fund on September 1. On September 30

Question

Havermill Co. establishes a $350 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $83 for Office Supplies, $157 for merchandise inventory, and $32 for miscellaneous expenses. The fund has a balance of $78. On October 1, the accountant determines that the fund should be increased by $70. The journal entry to record the establishment of the fund on September 1 is:

Multiple Choice

Debit Cash $350; credit Petty Cash $350.

Debit Petty Cash $350; credit Accounts Payable $350.

Debit Miscellaneous Expense $350; credit Cash $350.

Debit Petty Cash $350; credit Cash $350.

Debit Cash $350; credit Accounts Payable $350.

Explanation / Answer

Debit petty cash 350, credit cash 350 is correct

Since petty cash amount will increase on establishment of fund it should be debited, as cash amount will decrease after transferring it to petty cash, cash account should be credited

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