Brooks Agency set up a petty cash fund for $250. At the end of the current period, the fund contained $177 and had the following receipts:
entertainment, $32;
postage, $22; and printing, $19.
Required:
a. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.

a) Petty Cash      Dr.250

             Cash                    Cr. 250

b) Entertainment   Dr. 32

   Postage             Dr. 22

   Printing              Dr. 19

                  Petty  Cash               Cr. 73

So $ 73 will be reimbursed from Cash Account to Petty Cash

Petty Cash Dr.73

     Cash             Cr.73

Explanation:

All the expenses can never be paid through bank account or cheque. So companies establish petty cash fund to meet routine expenses.

a)In our example above, petty cash is an asset so any increase will be debited and cash is also asset. Therefore decrease in it will be credited

B) All expenses from petty cash will be debited because increase in expense is debited. Therefore decrease in cash is credited.

a) journal entry to record setting up of petty cash fund

Petty cash Fund                             Debit                          $ 250

Cash                                                Credit                                           $ 250

b) journal entry to record reimbursement of the fund

Petty cash Fund                             Debit                          $ 177

Cash                                                Credit                                           $ 177

Explanation:

The initial journal entry to record the setting up of the fund is by a debit to the petty cash fund and crediting cash. A bank account can also be used if a cheque withdrawal is amd to set up the fund. The initial set up amount is the amount of the journal entry

The reimbursement/ replenishment of the fund is with the amount that has been consumed for petty cash payments.

The actual recording of expenses is made with a separate journal entry debiting relevant expense accounts and crediting petty cash fund

answer; microeconomics;

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