Question

A company wants to decrease its $200 petty cash fund to $175. The entry to reduce the fund is: Multiple Choice 1. Debit Cash Over and Short for $25; credit Petty Cash $25. 2. Debit to Cash $25; credit Petty Cash $25. 3. Debit Miscellaneous Expenses $25; credit Cash $25. 4. Debit Petty Cash for $175; debit Cash Over and Short $25; credit Cash $200. 5. Debit Petty Cash $25; credit Cash $25.

Answer 1

Answer:

2. Debit to Cash $25; credit Petty Cash $25

Explanation:

The journal entry for decrease its petty cash fund is shown below:

Cash Dr $25

  To Petty cash $25

(Being the petty cash fund decrements is recorded)

The computation is shown below:

= $200 - $175

= $200

We simply debited the cash account and credited the petty cash account for $25 so that the proper posting could be done