Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 7: Q18E (page 417)

Controlling petty cash Just Hangin’ Night Club maintains an imprest petty cash fund of \(150, which is under the control of Sandra Morgan. At March 31, the fund holds \)14 cash and petty cash tickets for office supplies, \(128, and delivery expense, \)15.

Requirements

1. Explain how an imprest petty cash system works.

2. Journalize the establishment of the petty cash fund on March 1 and the replenishing of the fund on March 31.

3. Prepare a T-account for Petty Cash and post to the account. What is the balance of the Petty Cash account at all times?

Short Answer

Expert verified

The cash account is credited with $136.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of delivery expense

The delivery expense means the expense that is paid for the delivery.

02

Imprest system

The imprest system is a system that is used to maintain the balance of the petty cash fund. In this, cash plus petty cash equals the petty cash fund balance. This system works by adding the cash plus petty cash tickets to check the petty cash fund accuracy. If there is any difference between the petty cash fund balance and cash plus petty cash fund, then the custodian is responsible for this. Hence, this is the working of the imprest petty cash system.

03

Journal entries for a petty cash fund

Date

Particulars

Debit

Credit

Petty Cash Fund

$150

Cash

$150

(Journal entry for the creation of petty cash fund)

Office Supplies

$128

Delivery Expenses

$15

Cash Short & Over

$7

Cash

$136

(Being journal entry for replenishing petty cash fund)

04

T-accounts


Petty Cash

Bal.

$150

Office supplies

$128

Delivery Expense

$15

End. Balance

$7

The balance of the petty cash is $7 all time.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

How do businesses control cash receipts over the counter?

Accounting for petty cash transactions

Suppose that on September 1, Cool Gyrations, a disc jockey service, create a petty

cash fund with an imprest balance of \(350. During September, Ruth Mangan, fund

custodian, signs the following petty cash tickets:

Petty Cash

Ticket Number Item Amount

1 Postage for package received \) 25

2 Office party 10

3 Two boxes of stationery 20

4 Printer cartridges 15

5 Business dinner 65

On September 30, prior to replenishment, the fund contains these tickets plus cash of

\(210. The accounts affected by petty cash payments are Office Supplies, Entertainment

Expense, and Postage Expense.

Requirements

1. On September 30, how much cash should this petty cash fund hold before it is

replenished?

2. Journalize all required entries to (a) create the fund and (b) replenish it. Include

explanations.

3. Make the entry on October 1 to increase the fund balance to \)425. Include an

Explanation

Match the accounting terminology to the definitions.

1. Sarbanes-Oxley Act

2. Internal control

3. Encryption

4. Separation of duties

5. Internal auditors

a. Organizational plan and all the related measures adopted by an entity to safeguard assets,

encourage employees to follow company policies, promote operational efficiency, and ensure

accurate and reliable accounting records.

b. Employees of the business who ensure that the company’s employees are following company

policies and meeting legal requirements and that operations are running efficiently.

c. Rearranging plain-text messages by a mathematical process—the primary method of

achieving security in e-commerce.

d. Requires companies to review internal control and take responsibility for the accuracy and

completeness of their financial reports.

e. Dividing responsibilities between two or more people.

Applying internal control over cash receipts by mail. Review the internal controls over cash receipts by mail presented in the chapter. Exactly what is accomplished by the final step in the process, performed by the controller?

How do businesses control cash receipts by mail?
See all solutions

Recommended explanations on Business Studies Textbooks

Managers

Read Explanation

Nature of Business

Read Explanation

Operational Management

Read Explanation

Managerial Economics

Read Explanation

Strategic Analysis

Read Explanation

Intermediate Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free