Chapter 17

Current Asset – Petty Cash Fund

Problems

Journal Entry – Replenishment

1) On January 1, 2022, Jayree Corporation established a petty cash fund of P400. On December 31, 2022, the petty
cash fund was examined and found to have receipts and documents for miscellaneous expenses amounting to P364.
In addition, there was cash amounting to P44.

What entry would be required to record the replenishment for the petty cash fund on December 31, 2022?
A. Petty Cash 364
Cash Short or Over 8
Cash in Bank 356

B. Miscellaneous expense 364

Cash Short or Over 8
Petty Cash 356

C. Miscellaneous expense 364

Cash Short or Over 8

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Cash in Bank 356

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D. Miscellaneous expense 356
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Cash Short or Over 8

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Cash in Bank 356
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Journal Entry – Year End Adjustment

2) On December 1, 2021, Babe Corporation established a petty cash fund of P5,000. On December 31, 2021, the petty
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cash fund was examined and found to have receipts and documents for miscellaneous expenses amounting to
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P2,740 and a petty cash voucher for P1,250 signed by an employee as an IOU. In addition, there was cash amounting
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to P860.

Assuming that no replenishment was made at year end, what entry would be required to record adjustment of the
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petty cash fund on December 31, 2021?

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A. Miscellaneous Expense.......... ..........2,740

Petty Cash Fund.......... .......... ............860
Receivable from Employees..............1,250
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Cash Short or Over.......... .......... ........150

Cash in Bank.......... .......... ..........5,000
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B. Miscellaneous Expense.......... ..........2,740

Receivable from Employees.......... ...1,250
Cash Short or Over.......... .......... ........150
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Petty Cash Fund.......... .......... ....4,140

C. Miscellaneous Expense.......... ..........2,740

Receivable from Employees.......... ...1,250
Cash Short and Over.......... .......... .....150
Cash in Bank.......... .......... ..........4,140

D. Miscellaneous Expense.......... ..........2,740

Receivable from Employees.......... ...1,250
Cash in Bank.......... .......... ..........3,990

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Shortage & Ending Balance
Numbers 3 and 4
You were hired by Zandra Corporation to examine their accounts for the year ended December 31, 2021 and the following
are the items disclosed in your examination of Petty Cash account. A surprise count of cash and cash items was
conducted on January 5, 2022. The company has a petty cash fund of P55,000 which is maintained on an Imprest. The
cash count sheet disclosed the following:

Bills and Coins 28,750

Date Petty Cash Vouchers: Description Amount
December 27 Transportation expense 9,800
December 31 Postage stamps 2,700
January 2 Repair and sound system 3,200
January 4 Representation expense 1,250
3) What is the correct amount of petty cash fund on December 31, 2021?
A. 33,200
B. 28,750
C. 42,500
D. 55,000

4) What is the amount of shortage/overage?

A. 12,500
B. 21,800
C. 9,300

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D. 0

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Shortage & Ending Balance eH w
Numbers 5 and 6

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The petty cash fund of Hellflower Trading at the end of December 31, 2022 is composed of the following:
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Currencies and coins………………………................................................................................................... 3,200
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Unreplenished paid vouchers:

Supplies………………………................................................................................................................... 600
Transportation……………………….......................................................................................................... 100
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IOU from employee………………………........................................................................................................... 300

Unused supplies………………………............................................................................................................... 50
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Check drawn by a sales staff dated January 2, 2023………………………........................................................ 500

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Check dawn by a customer dated December 26, 2022………………………................................................... 1,450

Check drawn by an office director dated December 30, 2022……………………….......................................... 1,900
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Envelope containing cash contributions from employees for a thanksgiving party ........................................... 800
The general ledger balance of the imprest petty cash fund at December 31, 2022 is P10,000.
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5) How much is the correct petty cash fund at December 31, 2022?
A. 8,500
B. 5,100
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C. 3,200
D. 6,550
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6) How much is the cash shortage/overage?

A. 3,400
B. 1,100
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C. 3,350
D. 1,100

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 Theories

1) The internal control feature that is specific to petty cash is

A. Separation of duties C. Proper authorization
B. Assignment of responsibility D. Imprest system

2) Which of the following is an incorrect application of the imprest system of cash control?
A. Cash receipts must be deposited on a regular basis.
B. Cash disbursements must be made in the form of checks, regardless of the amount.
C. Material cash disbursements must be made in the form of checks.
D. Insignificant cash disbursements must be made out of the petty cash fund.

3) What is the petty cash fund?

A. Restricted cash.
B. Set aside for the payment of payroll.
C. Separately classified as a current asset.
D. Money kept on hand for making minor disbursements of coins and currency.

4) In most situations the petty cash fund is reimbursed just prior to the year end and an adjusting entry is made to avoid
A. The overstatement of cash and the understatement of expenses
B. The understatement of cash and the overstatement of expenses
C. The misstatement of revenues

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D. The understatement of cash with appropriate statement of expense

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5) Which of the following statements in relation to petty cash fund is false?
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A. Each disbursement from petty cash should be supported by a petty cash voucher.

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B. Creation of a petty cash fund requires a journal entry to reflect the transfer of fund out of the general cash account.
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C. At any time, the sum of the cash in the petty cash fund and the total of petty cash vouchers should equal the
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amount for which the imprest petty cash fund was established.
D. With the establishment of an imprest petty cash fund, one person is given the authority and responsibility for
issuing checks to cover minor disbursements.
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FAR by: John Bo S. Cayetano, CPA, MBA

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