Question
Cedar Point Diner operates a petty cash fund.
| Date | Event |
|---|
| July 1 | Established a petty cash fund of $300. |
| July 31 | Replenished the fund. Receipts on hand: postage $90, supplies $120, and meals for staff (miscellaneous) $60. Cash remaining in the box was $30. |
Required: Prepare the entry to establish the fund and the entry to replenish it. Charge the receipts to Postage Expense, Supplies, and Miscellaneous Expense.
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.