What is the correct journal entry to replenish the petty cash fund?
The correct journal entry to replenish the petty cash fund would be:
Debit: Cash for $270
Credit: Petty Cash for $270
The journal entry to replenish the petty cash fund would be a debit to Cash for $270 and a credit to Petty Cash for $270. When replenishing the petty cash fund, you need to increase the amount of cash in the fund to its original level. In this case, the original level is $370. Since there is currently only $80 in cash, you need to increase it by $270 to reach $370. To increase the cash, you debit the Cash account for $270. This means you are increasing the amount of cash on hand. At the same time, you credit the Petty Cash account for $270. This means you are decreasing the amount of cash in the petty cash fund.
Explanation:
Replenishing the Petty Cash Fund:
When replenishing the petty cash fund, it is essential to ensure that the fund is back to its original amount. In this case, the petty cash fund started with $370. However, there is only $80 in cash and $270 in receipts, totaling $350. To replenish the fund properly, you need to increase the cash amount by $270 to reach the original amount of $370.
Journal Entry:
The journal entry to replenish the petty cash fund involves debiting the Cash account by $270 and crediting the Petty Cash account by $270. By debiting Cash, you are increasing the amount of cash on hand to bring the fund back to its original level. On the other hand, crediting the Petty Cash account decreases the amount of cash recorded in the fund.
Proper Replenishment Process:
1. Calculate the amount needed to bring the petty cash fund back to its original level.
2. Debit the Cash account by the calculated amount.
3. Credit the Petty Cash account by the same amount.
By following this process and journal entry, you can ensure that the petty cash fund is properly replenished and accurately recorded in the accounting books.