Financial & Managerial Accounting: Information for Decisions w Access Card, 5th edition, ACC 211 & 212, Northern Virginia Community College
Financial & Managerial Accounting: Information for Decisions w Access Card, 5th edition, ACC 211 & 212, Northern Virginia Community College
5th Edition
ISBN: 9781259347641
Author: Ken W. Shaw, Barbara Chiappetta John J. Wild
Publisher: McGraw Hill Education
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Question
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Chapter 6, Problem 3PSA

1.

To determine

To prepare: Journal entries in the books of N Gallery during the month of February.

1.

Expert Solution
Check Mark

Explanation of Solution

To establish the petty cash fund.

Date

Account Title and Explanation

Post ref

Debit

($)

Credit

($)

May 1

Petty Cash

400

Cash

400

(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 $400.
  • Cash is also an asset account. Cash has gone out of the bank so it is decreased. Hence, cash account credited by $400.

2.

To determine

To prepare: Petty cash payments report for February.

2.

Expert Solution
Check Mark

Explanation of Solution


Petty cash payment report contains all payments made out of the petty cash fund.
Petty cash report is shown below for the month of February:

N Gallery

Petty Cash Payment Report (for February)

Date

Particulars

Amount ($)

Amount ($)

Delivery expenses

Feb. 23

Delivery of customer’s merchandise

20

Mileage expenses

Feb. 14

Reimbursement for mileage

68

Postage expenses

Feb. 12

Express delivery of contract

7.95

Feb. 27

Purchased postage stamps

54

61.95

Merchandise inventory ( transportation-in)

Feb. 9

COD charges on purchases

32.50

Feb. 25

COD charges on purchases

13.10

45.60

Office supplies expenses

Feb. 5

Purchased paper for copier

14.15

Feb. 20

Purchased stationery

67.77

81.92

Total

277.47

Thus, total expenses ascertained are $277.47.

3.

To determine

To Prepare: Journal entries in the books of N Gallery for part 2 to (a) reimburse and (b) increase the fund amount.

3.

Expert Solution
Check Mark

Explanation of Solution

(a)

Journal entry to reimburse

Date

Account Title and Explanation

Post ref

Debit

($)

Credit

($)

Feb 28

Delivery expenses

20

Mileage expenses

68

Postage expenses

61.95

Merchandise inventory

45.6

Office supplies expenses

81.92

Cash over and short

2.11

Cash

279.58

(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 $20, $68, $61.95, $45.6 and $81.92 respectively are debited.
  • $120.42 is in the cash box out of total petty cash fund $400. This implies $279.58 ($400-$120.42) should have spent. Since actual expenses are $277.47and cash available to spend is $279.58, difference of this $2.11 is debited to the ‘Cash over and short’ account.
  • Cash is an asset account. Cash has paid out of the bank so it is decreased. Hence, cash is credited with $279.58.

(b)

Journal entry to increase the fund amount

Date

Account Title and Explanation

Post ref

Debit

($)

Credit

($)

Feb 28

Petty Cash

100

Cash

100

(To increase petty cash fund to $500)

  • Petty cash is an asset. When it increases it gets debited. So, here petty cash increases by $100. 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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