Question

A $200 petty cash fund has cash of $20 and receipts of $177. The journal entry to replenish the account would include a credit to:
a. Cash for $20
b. Petty Cash for $190
c. Cash Short and Over for $3
d. Cash for $180

Answer 1

A $200 petty cash fund has cash of $20 and receipts of $177. The journal entry to replenish the account would include a credit to:

d. Cash for $180

Explanation: As observed above the petty cash receipts are falling short of $3, But that will be adjusted with expenses as its a small amount and balance of $200 needs to be maintained in the petty cash.

Answer 2

The cash account should be credited with $180 as the cash is transferred to the petty cash department.

Further explanation:

Petty cash fund:  It refers to the fund established for paying the small amount of expenditures which are incurred on a daily basis. The petty cash fund is suitable for small payments where the check is not useful.

Replenishing petty cash:  Petty cash department has to maintain the minimum balance in order to meet the minor expenses of the business. When the balance of the petty cash book goes below the minimum balance; the custodian of the petty cash department requests funds from the management of the company to maintain the minimum balance.

In the current case, the minimum balance of petty cash book is $200, and petty cash department has $20. So, it requires only $180.  

Amount replenished = Minimum Fund – Cash available

                                 = $200 - $20

                                 = $180

Thus, the cash account should be credited with $180 as the cash is transferred to the petty cash department.

Learn more:

1. Learn more about journal entry related to the purchase of the asset

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2. Learn more about the recording the inventory purchase

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3. Learn more about the journal entry for petty cash book

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Answer details:  

Grade: Middle School

Subject: Accounts

Chapter: Journal Entries

Keywords: A $200, petty cash fund, $20, receipts, of $177,  journal entry to, replenish, the account, would include a credit, $20, Petty Cash, $190 Cash, Short and Over, $3, $180, petty cash fund, Replenishing petty cash.