P8-2A Winningham Company maintains a petty cash fund for smallexpenditures.The f
ID: 2442446 • Letter: P
Question
P8-2A Winningham Company maintains a petty cash fund for smallexpenditures.The followingtransactions occurred over a 2-month period.
July 1 Established petty cash fund by writing a check on CubsBank for $200.
15 Replenished the petty cash fund by writing a check for$196.00. On this date the fund consisted
of $4.00 in cash and the following petty cash receipts:freight-out $94.00, postage expense
$42.40, entertainment expense $46.60, and miscellaneousexpense $11.20.
31 Replenished the petty cash fund by writing a check for$192.00. At this date, the fund
consisted of $8.00 in cash and the following petty cashreceipts: freight-out $82.10,
charitable contributions expense $45.00, postage expense$25.50, and miscellaneous
expense $39.40.
Aug. 15 Replenished the petty cash fund by writing a check for$187.00. On this date, the fund
consisted of $13.00 in cash and the following petty cashreceipts: freight-out $75.60, entertainment
expense $43.00, postage expense $33.00, and miscellaneousexpense $37.00.
16 Increased the amount of the petty cash fund to $300 bywriting a check for $100.
31 Replenished petty cash fund by writing a check for $284.00.On this date, the fund consisted
of $16 in cash and the following petty cash receipts: postageexpense $140.00,
travel expense $95.60, and freight-out $47.10.
Instructions
(a) Journalize the petty cash transactions.
(b) Post to the Petty Cash account.
(c) What internal control features exist in a petty cashfund?
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Explanation / Answer
a)July1 Petty Cash $200
Cash $200
b)July 15 Freight-out 94.00
Postage expenses 42.40
Entertainment expenses 46.40
Miscellaneous 11.20
Cash 194
July31 Freight-out 82.10
Charitable contribution 45.00
Postage expenses 25.50
Miscellaneous 39.40
Cash 192
Aug 15 Freight 75.60
Entertainment expenses 43.00
Postage 33.00
Miscellaneous 37.00
Cash 188.60
Aug 31 Postage expenses 140.00
Travelling expenses 95.60
Freight-out 47.10
Cash 282.70
b) (Debit) Petty cash Account $200
(Credit) Cash $200
C) Under the imprest system the petty cash custodian is responsible at all times for the amount of the fund on hand either as cash or in the form of signed receipts. These receipts provide the evidence required by the disbursing officer to issue a reimbursement check. Further, a company follows two additional procedures to obtain more complete control over the petty cash fund:
1. A superior of the petty cash custodian makes surprise counts of the fund from time to time to determine that a satisfactory accounting of the fund has occurred.
2. The company cancels or mutilates petty cash receipts after they have been submitted for reimbursement, so that they cannot be used to secure a second reimbursement.
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