The journal entry to establish the petty cash fund includes:

Question

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When establishing a petty cash fund, we need to decrease our total cash amount and increase the amount available for petty expenses. Therefore, we make a debit to petty cash and a credit to cash. The amount will depend on how much we need to set aside for petty expenses, which in this case is $150. Option A has the debits and credits reversed, Option C has a credit to cash (increasing total cash) and Option D has a credit to petty cash for the wrong amount.

The Journal Entry to Establish the Petty Cash Fund Includes