A company plans to decrease a $200 petty cash fund to $75.The current balance in the account includes $45 in receipts and $165 in currency.The entry to reduce the fund will include a:

Question

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To decrease the fund to $75, we need to remove $125 ($200 - $75) from the account. Since there is only $45 in receipts, the remaining $80 is considered cash. Therefore, we need to debit the Cash account (not Cash Short and Over, as there is no discrepancy in the cash count) for $90 ($80 + $10 to balance the entry), and credit the Petty Cash account for $165 (to reduce it to $75). This also means that there is $10 cash overage, which will be recorded as a debit to Cash Short and Over. The Miscellaneous Expenses account is not relevant to this entry.

A Company Plans to Decrease a $200 Petty Cash Fund