Acompany plans to decrease a $200 petty cash fund to $75. the current balance in the account includes $45 in receipts and $165 in currency. the entry to reduce the fund will include a:

In this scenario, we have to record the imbursement application which says that their is an expense of $45, which should be reimbursed to the department so that they are able to meet the demand in the future. This means the expense has been increased by spending money from petty cash (Increase in Expense and decrease in petty cash-current assets). The initial entry when the accounts office received the application for reimbursement will be:

Dr Expense account   $45

Cr                 Petty Cash-"relevant department name"    $45

Now the reimburse level of petty cash set is $75. We will ask the department to pay the accounts department above $75 which is $165-$75=$90. This will increase the cash or bank account of the company and lower the petty cash account. Both are assets in nature, one will decrease (Petty cash) and the other will increase (Cash or bank account).

So the entry will be:

Dr Cash or Bank account   $90

Cr             Petty Cash-"relevant department name"    $90

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