Question:

Exercise 8-4 Petty cash fund with a shortage?

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Exercise 8-4

Petty cash fund with a shortage

Gannon Company establishes a $400 petty cash fund on September 9. On September 30, the fund

shows $166 in cash along with receipts for the following expenditures: transportation-in, $32; postage

expenses, $113; and miscellaneous expenses, $87. The petty cashier could not account for a $2 shortage

in the fund. Gannon uses the perpetual system in accounting for merchandise inventory. Prepare

(1) the September 9 entry to establish the fund and (2) the September 30 entry to both reimburse the

fund and reduce it to $300.

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  1. Prepare (1) the September 9 entry to establish the fund

    Dr  Petty cash $400

    Cr  Cash $400

    (2) the September 30 entry to both reimburse the fund and reduce it to $300.

    Dr  Merchandise inventory $32

    Dr  Postage expense $113

    Dr  Miscellaneous expenses $87

    Dr  Cash shortage $2

    Cr  Petty cash $234

    (to record the amounts spent)

    Dr  Petty cash $134

    Cr  Cash $134

    (to reimburse the fund to $300)

    This site should be useful to you:

    http://www.principlesofaccounting.com/ch...

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