Chapter 7, Problem 7.18E

Requirement 1:

To determine

Petty cash fund: Petty cash fund is a fund established to pay insignificant amounts like postage, office supplies, and lunches. In day-to-day life, it becomes difficult to use checks for daily expenses. Therefore, companies maintain some minimum amount of funds in the hand for such daily expenses. These funds are called as petty cash funds. These funds are managed by custodian. This system is otherwise called as imprest system.

To explain: The working of imprest petty cash systems.

Requirement 2:

To determine

To prepare: Journal entries to record the petty cash transactions.

Requirement 3:

To determine

To prepare: T-accounts of petty cash.