Question

Larkspur Airline needs to send out one of its employees to Nunavut for three weeks to perform some repairs on some aircraft it owns. Some of the payments to be made for the supplies needed on the assignment will be paid from a petty cash fund. Larkspur issued a cheque in the amount of $800.00 to establish the fund. After a few days at the assignment, the employee returned the following vouchers and receipts along with a report that the fund had $73.20 left in cash. Larkspur decided to increase the petty cash fund to $1,000.00

Receipt		Amount			Description
1		$27.20			Taxi ride from airport to job site
2		43.85			FedEx charges for delivering plane parts
3		34.05			Long distance telephone charges
4		73.50			Cleaning supplies - all used
5		334.50			Air freight to ship parts out for overhaul
6		93.75			Small tools replaced
7		46.45			Tarp to protect engine from elements
8		66.75			Grease and oil supplies - all used 1.Prepare the journal entry to establish the petty cash fund. 2.Prepare the journal entry to replenish the fund to $800.00. 3.Prepare the journal entry to increase the fund to $1,000.00

Answer 1

Following are the journal entry for establishing the petty cash fund.

Particulars	debit	credit
Petty cash To cash (To establish petty cash with $800 amount)	800	800

2 .Journal entry to replenish the fund

Accounts title	debit	credit
Taxi charges FedEx charges Telephone charges Cleaning supplies Freight Tools Tarp exp Greasing & oiling Cash over & short (note) To cash To cash short & over (To replenishment of cash and short cash recorded)	27.20 43.85 34.05 73.50 334.50 93.75 46.45 66.75 6.75	726.80

Note :- total cash to be replenished is 800-73.20 =$726.80

But total expenses are coming out to be $720.05

Thus, Cash short = $726.8-$720.05=$6.75

3 . Journal entry to increase fund to $1000 from $800 is

Particulars	debit	credit
Petty cash To cash (To petty cash fund increased to $1000 from $800)	200	200