Question

a company set-up a petty cash fund with $800. the disbursements are as follows:

office supplies: $300
shipping: 50
postage: 30
delivery expense: $350

answer the question below based on the above information.

to replenish the petty cash fund, the journal entry would include?

• debit postage and credit cash
• credit cash and debit postage
• credit petty cash and debit cash
• debit petty cash and credit cash

Explanation:

Analyze the petty cash replenishment process

Using the Petty Cash Fund and Journalizing Petty Cash knowledge points, we analyze how a petty cash fund is replenished. When replenishing the fund, the individual expenses paid out of the fund are recorded with debits to their respective expense accounts, and Cash is credited for the total amount needed to bring the fund back to its original balance.

Determine the debits and credits

The disbursements listed are:

• Office Supplies: \$300 (Debit Office Supplies Expense)
• Shipping: \$50 (Debit Shipping Expense / Freight-Out)
• Postage: \$30 (Debit Postage Expense)
• Delivery Expense: \$350 (Debit Delivery Expense)

The total replenishment amount is:

$$ \$300 + \$50 + \$30 + \$350 = \$730 $$

The journal entry to replenish the fund is:

• Debit various expense accounts (including Postage Expense for \$30)
• Credit Cash for \$730

Evaluate the given options

Let's evaluate the options based on the standard replenishment entry:

• "Debit postage and credit cash": This is correct because the entry debits the individual expense accounts (such as postage) and credits the Cash account.
• "Credit cash and debit postage": While it mentions the correct accounts, standard accounting convention lists debits first, making "Debit postage and credit cash" the standard description.
• "Credit petty cash and debit Cash": Incorrect. The Petty Cash account is not credited during routine replenishment.
• "Debit petty cash and credit Cash": Incorrect. The Petty Cash account is only debited when establishing or increasing the size of the fund, not during routine replenishment.

Therefore, the correct option is "Debit postage and credit cash".

Answer:

• Debit postage and credit cash (Correct answer)
• Credit cash and debit postage
• Credit pretty cash and debit Cash
• Debit petty cash and credit Cash