Ferguson Co. decides to establish a petty cash fund with a beginning balance of

Question

Ferguson Co. decides to establish a petty cash fund with a beginning balance of $280. The company decides that any purchase under $41 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

A.) Debit Cash $280 and credit Petty Cash Over and Short $280.

B.) Debit Cash $280 and credit Cash Over and Short $280.

C.) Debit Petty Cash $280 and credit Cash $280.

D.) Debit Cash $280 and credit Petty Cash $280.

E.) Debit Petty Cash $280; credit Cash $239; and credit Cash Over and Short $41.

Ferguson Co. decides to establish a petty cash fund with a beginning balance of $280. The company decides that any purchase under $41 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

Explanation / Answer

Journal Entry for establishing petty cash fund will be as follows

Petty cash A/c Dr. $280

To Cash A/c $280

Therefor answer will be (C) Debit Petty Cash $280 and credit Cash $280.

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