Ferguson Co.decides to establish a petty cash fund with a beginning balance of $200.The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system.The journal entry to record establishing the account is:

Question

Quizplus · Accepted Answer

When establishing a petty cash fund, the journal entry should credit the main Cash account and debit the Petty Cash account for the same amount, in this case $200. Option C is the only choice that correctly follows this approach. The other options involve unnecessary or incorrect accounts, such as Cash Over and Short, or debit/credit imbalances.