Question

Kiona Co. set up a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in May (the last month of the company’s fiscal year).

May 1

Prepared a company check for $300 to establish the petty cash fund.

15

Prepared a company check to replenish the fund for the following expenditures made since May 1.

Paid $88 for janitorial expenses.

Paid $53.68 for miscellaneous expenses.

Paid postage expenses of $53.50.

Paid $47.15 to The County Gazette (the local newspaper) for advertising expense.

Counted $62.15 remaining in the petty cashbox.

16

Prepared a company check for $200 to increase the fund to $500.

31

The petty cashier reports that $288.20 cash remains in the fund. A company check is drawn to replenish the fund for the following expenditures made since May 15.

Paid postage expenses of $147.36.

Reimbursed the office manager for mileage expense, $23.50.

Paid $34.75 in delivery expense for products to a customer, terms FOB destination.

31

The company decides that the May 16 increase in the fund was too large. It reduces the fund by $100, leaving a total of $400.

Required

Prepare journal entries (in dollars and cents) to establish the fund on May 1, to replenish it on May 15 and on May 31, and to reflect any increase or decrease in the fund balance on May 16 and May 31.

Check (1) Cr. to Cash: May 15, $237.85; May 16, $200.00

Analysis Component

Explain how the company’s financial statements are affected if the petty cash fund is not replenished and no entry is made on May 31.

Answer 1

Journal Entry
Date	Account Title & Explanation	Debit	Credit
01/05	Petty Cash	$300.00
	Cash		$300.00
	(Being Established Petty Cash Account)
15-05	Janoitorial Expense	$88.00
	Miscellaneous Expense	$53.68
	Postage Expense	$53.50
	Advertising Expense	$47.15
	Cash Over & Short		4.48
	Cash		$237.85
	(Being Replineshed the Petty Cash Fund)
16-05	Petty Cash	$200.00
	Cash		$200.00
	Being Fund Trf. in Petty Cash Fund)
31-05	Postage Expense	$147.36
	Mileage Expense	$23.50
	Freight Out Expense	$34.75
	Cash Over & Short	$6.19
	Cash (500-288.20)		$211.80
	(Being Replineshed the Petty Cash Fund)
31-05	Cash	100
	Petty Cash		100
	Being Petty Cash Fund reduce to 400
2. If No Replensihment of petty cash is made and no entry is made on May31 then , the cash available will be utilised for any payment to be made in excess of petty cash limit.