How do you establish a fund?

Question

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.

Answer 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)

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