Question

A $100 petty cash fund has cash of $17 and receipts of $86. The journal entry to replenish the account would include a :

a. debit to Cash for $86.

b. credit to Petty Cash for $86.

c. credit to Cash Over and Short for $3.

d. credit to Cash for $86.

Answer 1

Answer:

The correct option is C, credit to cash over and short for $3

Explanation:

The requirement targets the balancing entry in the cash account,with cash of $17 in the petty cash account coupled with receipts of $86, the total amount in the petty cash is $103 ($86+$17) and the established float is just $100, which implies that the petty cash has an excess fund of $3 that must be returned to the main cash account.

The excess is the difference between $103 cash in the petty cash account and the maximum float of $100($103-$100)

Answer 2

Answer:

credit to cash over and short for $3

Explanation:

petty cash fund = $100

cash available = $17

receipts = $86

in order to replenish the account

cash available + receipts - petty cash fund

= ( $86 + $17 ) - $100 = $3

The journal entry for this transaction will be : credit to cash over and short for $3

A petty cash fund is an account set aside by a firm or company for the day to day running of the company ( minor expenses) and there is usually a threshold amount expected to be in it hence in the Journal  a credit to cash over and short for $3 will be entered.