A company plans to decrease a $200 petty cash fund to $75.The current balance in the account includes $35 in receipts and $165 in currency.The entry to reduce the size of the petty cash fund will include a:

Question

Quizplus · Accepted Answer

To reduce the size of the petty cash fund from $200 to $75, we need to subtract $125 ($200 - $75) from the current balance of $200. Since $35 is in receipts, we only need to subtract $90 ($125 - $35) in currency. Therefore, we will debit the cash account by $90 to reflect the decrease in funds. The entry will be a debit to Petty Cash for $90 and a credit to Cash for $90. There is no need to debit Petty Cash for $35 or $75 in this situation.

A Company Plans to Decrease a $200 Petty Cash Fund