
Concept explainers
Petty cash system:
Petty cash system is a system which is used for making payments for small day to day expenses. It facilitates ease to deal with small cash disbursements.
It means record of financial data related to business transactions in a journal in a manner so that debit equals credit. It provides an audit trail to the auditor and a means to analyze the effects of transactions to an organization’s financial health.
Rules of Journal Entry:
The rules for journal entry are defined by 5 accounting components,
- Assets: Increase in asset should be debit and decrease should be credit.
- Liabilities: Increase in liabilities should be credit and decrease should be debit.
- Equity: Increase in Equity should be credit and decrease should be debit.
- Expense: Increase in expense should be debit and decrease should be credit.
- Revenue: Increase in revenue should be credit and decrease should be debit.
1.
To prepare: Journal entries in the books of K Company during the month of May.
2.
To explain: Affect on financial statements of non replenished petty cash fund and lack of journal entry on May 31.

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Chapter 6 Solutions
Gen Combo Ll Financial Accounting Fundamentals; Connect Access Card
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