A company wants to decrease its $200 petty cash fund to $175.The entry to reduce the fund is:

Question

Quizplus · Accepted Answer

The entry to reduce the petty cash fund is a debit to the Petty Cash account and a credit to the Cash account. In this case, the decrease is for $25, so the entry will be a debit to Cash for $25 and a credit to Petty Cash for $25. Option A is incorrect because Cash Over and Short is only used to adjust for discrepancies in the cash account, not for decreasing the petty cash fund. Option C is incorrect because it debits an expense account, which is not necessary for this transaction. Option D is incorrect because it debits the entire petty cash fund and creates an entry for Cash Over and Short, which is unnecessary for this transaction. Option E is incorrect because it only credits the Cash account and does not debit the Petty Cash account.

A Company Wants to Decrease Its $200 Petty Cash Fund