Brief Exercise 7: 15-Grouper Company Designated Jill Holland

Brief Exercise 7 15grouper Company Designated Jill Holland As Petty Ca

Brief Exercise 7-15 Grouper Company designated Jill Holland as petty cash custodian and established a petty cash fund of $260. The fund is reimbursed when the cash in the fund is at $23, which it is. Petty cash receipts indicate funds were disbursed for office supplies $98 and miscellaneous expense $136. Prepare journal entries for the establishment of the fund and the reimbursement.

Sample Paper For Above instruction

Introduction

The process of managing petty cash involves establishing a petty cash fund and subsequently reimbursing it as payments are made. This paper discusses the journal entries required for establishing a petty cash fund of $260, and the reimbursement process when cash is at a specified low point, exemplified by the case of Grouper Company with Jill Holland as the custodian.

Establishment of the Petty Cash Fund

Initially, the company must record the establishment of the petty cash fund. Since Petty Cash is an asset account that increases with debits, and cash decreases, the journal entry involves a debit to Petty Cash and a credit to Cash. The amount of $260 represents the established fund.

The journal entry is as follows:

Debit: Petty Cash $260

Credit: Cash $260

This entry reflects the transfer of cash into the petty cash fund. It signifies the company's commitment to maintain a petty cash fund for minor cash disbursements. Jill Holland, as the petty cash custodian, is authorized to disburse cash up to the limit of $260.

Reimbursement of Petty Cash

The company periodically replenishes the petty cash fund to its original amount, typically when the cash in the fund diminishes due to disbursements. Reimbursements occur by recording the expenses paid out of petty cash and then replenishing the petty cash account.

In this scenario, the receipts show disbursements of $98 for office supplies and $136 for miscellaneous expenses, amounting to a total disbursement of $234. The cash remaining in the fund is $23, indicating that the total cash plus receipts equal the fund’s established amount, confirming that the petty cash is disbursed correctly.

To record the reimbursement:

1. First, record the expenses:

- Debit Office Supplies $98

- Debit Miscellaneous Expenses $136

2. Then, record the cash shortage (if any). Since cash remaining is $23, and disbursements total $234, the total paid is $260, which matches the original fund. Therefore, the total amount to be reimbursed equals the total disbursements of $234, which are documented by receipts.

3. The remaining cash in the fund is $23, which is proof that cash and receipts together total $260.

The journal entry for reimbursement is:

Debit: Various Expense Accounts (Office Supplies and Miscellaneous Expenses) $234

Credit: Cash $234

This entry records the expenses paid and replenishes the petty cash fund.

Alternatively, to record the replenishment:

- Debit Expense accounts for the total of receipts ($98 + $136 = $234).

- Credit Cash for the same amount ($234).

- The remaining cash ($23) is accounted for in the petty cash fund balance.

Conclusion

Establishing a petty cash fund involves debiting Petty Cash and crediting Cash. Replenishing the fund involves recording expenses paid out of petty cash and reducing cash accordingly. Accurate recording ensures proper control over small cash transactions within a company, exemplified by Grouper Company's scenario with Jill Holland.

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