Forney Company maintains a petty cash fund for small expenditures. The following transactions occurred over a two-month period:
Feb. 1 Established petty cash fund by writing a cheque on Algonquin Bank for $200.
Feb. 15 Replenished the petty cash fund by writing a cheque for $195.00. On this date the fund consisted of $5.00 in cash and the following petty cash receipts:
Freight out............................$82.00
Postage expense.......................72.50
Entertainment expense................36.60
Feb. 28 Replenished the petty cash fund by writing a cheque for $152.00. At this date, the fund consisted of $48.00 in cash and the following petty cash receipts:
Freight out......................$42.50
Contributions expense..........25.00
Repairs expense..................41.90
Supplies...........................45.00
Mar. 15 Replenished the petty cash fund by writing a cheque for $187.00. On this date, the fund consisted of $13.00 in cash and the following petty cash receipts:
Freight out.........................$37.60
Entertainment expense............53.75
Postage expense....................33.25
Supplies.............................67.00
Mar. 16 Increased the amount of the petty cash fund to $250 by writing a cheque for $50.
Mar. 31 Replenished the petty cash fund by writing a cheque for $234.00. On this date, the fund consisted of $16 in cash and the following petty cash receipts:
Postage expense................$40.00
Travel expense...................75.60
Freight out........................47.10
Entertainment expense.........68.50
Instructions
(a) Journalize the petty cash transactions.
(b) What internal control features exist in a petty cash fund?
Taking It Further
Forney Company established a petty cash fund to pay for a variety of low-value items. Su Ma, the petty cash custodian, regularly borrows cash from the fund to pay for personal expenses. Su Ma has always repaid these amounts. Is this a problem for Forney Company? If it is, explain what the company could do to strengthen internal control.