The entry to establish a petty cash fund includes:

Question

Quizplus · Accepted Answer

When establishing a petty cash fund, the entry should record a debit to the Petty Cash account and a credit to the Cash account. This reflects the decrease in the checking account and the increase in the cash on hand in the petty cash fund. Option A is incorrect because Accounts Receivable is not involved in petty cash transactions. Option C is incorrect because cash is not being transferred from petty cash to the bank account, so a debit to Cash would not be appropriate. Option D is incorrect because Petty Cash Over and Short is only used when balancing the petty cash fund at the end of a period. Option E is incorrect because a Cash Over and Short account is not necessary when establishing a petty cash fund.

The Entry to Establish a Petty Cash Fund Includes