Concept explainers
1.
To prepare:
1.
Explanation of Solution
To establish the petty cash fund.
|
Date |
Account Title and Explanation |
Post ref |
Debit ($) |
Credit ($) |
|
Mar.5 |
Petty Cash |
250 |
||
|
Cash |
250 |
|||
|
|
(To establish petty cash fund) |
- Petty cash is an asset account, when it increases it gets debited. Here, cash is added to petty cash so; petty cash account is increased and debited by $250.
- Cash is also an asset account. Cash has gone out of the bank so it is decreased. Hence, cash account credited by $250.
2.
To prepare: Petty cash payments report for the month of March.
2.
Explanation of Solution
Petty cash payment report contains all payments made out of the petty cash fund.
Petty cash report is shown below for March month:
|
BM Center |
|||
|
Petty Cash Payment Report (for March) |
|||
|
Date |
Particulars |
Amount ($) |
Amount ($) |
|
Delivery expenses |
|||
|
Mar.11 |
Delivery of customer’s merchandise |
10.75 |
|
|
Mileage expenses |
|||
|
Mar.30 |
Reimbursement for mileage |
56.80 |
|
|
Postage expenses |
|||
|
Mar.28 |
Paid postage |
18 |
|
|
Merchandise inventory ( transportation-in) |
|||
|
Mar. 6 |
COD charges on purchases |
12.50 |
|
|
Mar. 27 |
COD charges on purchases |
45.10 |
57.60 |
|
Office supplies expenses |
|||
|
Mar.12 |
Purchased file folders |
14.13 |
|
|
Mar.14 |
Reimbursement for office supplies |
11.65 |
|
|
Mar.18 |
Purchased paper |
20.54 |
46.32 |
|
Total |
|
189.47 |
|
Total expenses ascertained are $189.47.
3.
To Prepare: Journal entries for above part 2 to (a) reimburse and (b) increase the fund amount.
3.
Explanation of Solution
(a)
|
Date |
Account Title and Explanation |
Post ref |
Debit ($) |
Credit ($) |
|
Mar.31 |
Delivery expenses |
10.75 |
||
|
Mileage expenses |
56.80 |
|||
|
Postage expenses |
18 |
|||
|
Merchandise inventory |
57.60 |
|||
|
Office supplies expenses |
46.32 |
|||
|
Cash over and short |
1 |
|||
|
Cash |
188.47 |
|||
|
|
(To reimburse the petty cash fund ) |
- All expenses have debit balance. Expenses increase and get debited. So, given in the question delivery, Mileage, postage, merchandise inventory and office supplies expenses $10.75, $56.80, $18, $57.60 and $46.32 respectively are debited.
- $61.53 is remained in the fund out of total petty cash fund $250. This implies $188.47 ($250-$61.53) should have spent. Since actual expenses are $189.47and cash available to spend is $188.47, difference of this $1 is credited to the ‘Cash over and short’ account.
- Cash is an asset account. Cash has gone out of the bank so it is decreased. Hence, cash is credited with $188.47.
(b)
|
Date |
Account Title and Explanation |
Post ref |
Debit ($) |
Credit ($) |
|
Mar.31 |
Petty Cash |
50 |
||
|
Cash |
50 |
|||
|
|
(To increase petty cash fund ) |
- Petty cash is an asset. When it increases it gets debited. So, here petty cash increases by $50. Thus petty cash account gets debited.
- Cash is also an asset. When it decreases it gets credited. So, here cash decreases. Thus cash account gets credited.
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