Question
Mistlewood Café runs an imprest petty cash fund.
| Date | Event |
|---|
| March 1 | Established a petty cash fund of $300 by cashing a cheque. |
| March 31 | The fund held receipts for postage $84, supplies $112 and delivery charges $58, plus $41 in coins and notes. A cheque was cashed to restore the fund to $300. |
| April 1 | Increased the fund to $400. |
Required: Prepare the journal entries. Use Petty Cash, Cash, Postage Expense, Supplies Expense, Delivery Expense and Cash Over and Short.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 7 — cash and cash equivalents
A bank reconciliation explains the difference between the ledger balance and the bank statement. Only items the business did not yet know about — bank charges, direct credits, dishonoured cheques, interest — produce journal entries; timing differences such as outstanding cheques and deposits in transit adjust the bank side and never hit the books.
Common mistakes
- Journalising outstanding cheques or deposits in transit, which require no entry at all.
- Adjusting the bank side for an error made in the entity's own ledger, or the reverse.
- Reconciling to a corrected balance and then omitting the entries that made it correct.