Transactions involving the petty cash fund of Sonar Company are as follows: Mar.

Question

Transactions involving the petty cash fund of Sonar Company are as follows:

Mar. 1 Established a petty cash fund of $ 750, which will be under the control of the assistant office manager.

31 Fund was replenished on this date. Prior to replenishment, the fund consisted of the following:

Present journal entries for these transactions. Use the Cash Short and Over account for any shortage or overage in the fund.

Coins and currency $ 491.50 Petty cash voucher indicating disbursements for: Postage stamps $82.00 Suppliers money for office employees working overtime 36.00 Office supplies 32.70 Window washing service 60.00 Flowers for wedding employee 15.00 Flower for hospitalized employee 15.00 Employee’s IOU 15.00

Explanation / Answer

GENERAL JOURNAL

As we can see, there was an error in handling cash during the month as the sum of vouchers ($255.7) and the remaining petty cash on hand ($491.5) equals $747.2 while the petty cash fund was established at $750. The difference of $2.8 is a cash shortage.A debit in Cash Short and Over represents an expense. Thus the company will have an expense of $2.8, since there was a cash shortage of $2.8.

The balance in Cash Short and Over is reported on the income statement. If the balance is insignificant, the account balance will likely be reported as part of miscellaneous expense. Here Cash Shprt and Over is a sum of $2.8 is to be reported as a miscellaneous expense on the income statement .

DATE ACCOUNT TITLE AND DESCRIPTION POST REF. DEBIT CREDIT MARCH 1 PETTY CASH 750 CASH 750 ESTABLISH PETTY CASH FUND MARCH 30 POSTAGE STAMPS 82 OVERTIME TO OFFICE EMPLOYEES 36 OFFICE SUPPLIES 32.70 WINDOW WASHING SERVICE 60 FLOWERS FOR WEDDING EMPLOYEES 15 FLOWERS FOR HOSPITALIZED EMPLOYEES 15 EMPLOYEES IOU 15 CASH OVER AND SHORT 2.8 CASH 257.8 REPLENISH PETTY CASH FUND

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