Question

On April 30, Midwest Company established a petty cash fund of $1,000. On May 1, a disbursement of $355 was made from the fund for payment of delivery expense. What entry should be made on May 1 to record this disbursement?

Answer 1

Answer: Debit Delivery expense $355; Credit Cash $355

Explanation: Firstly, the disbursement was made from the petty cash account. This ultimately represents a cash account. Secondly, the disbursement was used for the payment of delivery expense to the tune f $355 (this is an operating expense). So the appropriate journals entries required to be recorded are as provided above. The disbursement is an outflow of cash and it was used for delivery expense.