Multiple Choice
When a petty cash fund is replenished, which accounts are affected?
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6. Internal Controls and Reporting Cash
Petty Cash
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When reimbursing the petty cash fund, which of the following accounts is typically credited?
A
Accounts Payable
B
Petty Cash
C
Miscellaneous Expense
D
Cash
Verified step by step guidance1
Understand the concept of petty cash: Petty cash is a small amount of money kept on hand to cover minor expenses. When the petty cash fund is reimbursed, it means the fund is being replenished to its original balance after being used for various expenses.
Identify the accounts involved: When reimbursing the petty cash fund, the expenses incurred (e.g., Miscellaneous Expense, Office Supplies, etc.) are debited to reflect the costs. The account credited is typically Cash, as the reimbursement reduces the company's cash balance.
Clarify why Cash is credited: Cash is credited because the reimbursement involves taking money from the company's main cash account to replenish the petty cash fund. This reflects a decrease in the main cash account.
Explain why other accounts are not credited: Accounts Payable is not credited because this transaction does not involve a liability to a vendor. Petty Cash is not credited because the petty cash account remains unchanged—it is replenished, not reduced. Miscellaneous Expense is not credited because it is an expense account and is typically debited to record the expenses incurred.
Summarize the journal entry: The journal entry for reimbursing the petty cash fund typically involves debiting the appropriate expense accounts (e.g., Miscellaneous Expense, Office Supplies) and crediting Cash to reflect the reduction in the company's main cash account.
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