Blake Company established a petty cash fund in the amount of $400.At the end of the accounting period,the petty cash box contained receipts for expenditures amounting to $180 and $215 in cash.If the entries to record the disbursements and to replenish the fund are combined,what effect will the entries to replenish the fund have on total assets and expenses?

Question

Quizplus · Accepted Answer

Since the amount of petty cash on hand is $215,it will take $185 to replenish the petty cash fund to its imprest balance of $400.Because the miscellaneous expenses paid by the fund totaled $180,there is a cash shortage of $5 (Note that a cash shortage is an expense that is recorded by debiting the Cash Short and Over account. ).The entry will cause total assets (cash)and stockholders' equity (retained earnings)to decrease by $185.Expenses will increase by $5.

Blake Company Established a Petty Cash Fund in the Amount