Cool Salad Dressings creates a petty cash fund

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P7-38B Accounting for petty cash transactions [20–30 min]

On September 1, Cool Salad Dressings creates a petty cash fund with an imprest balance of
$250. During September, Michael Martell, the fund custodian, signs the following petty
cash tickets:

101 Office supplies $30
102 cas fare for executive 20
103 delivery of package across town 35

and so on ..

On September 30, prior to replenishment, the fund contains these tickets plus cash of
$65. The accounts affected by petty cash payments are Office supplies expense,
Travel expense, Delivery expense, Entertainment expense, and Inventory.

Requirements

1. Explain the characteristics and the internal control features of an imprest fund.

2. On September 30, how much cash should the petty cash fund hold before it is
replenished?

3. Journalize all required entries to create the fund and replenish it. Include
explanations.

4. Make the October 1 entry to increase the fund balance to $300. Include an
explanation, and briefly describe what the custodian does.