Ferguson Co

Ferguson Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

A) Debit Petty Cash $200 and credit Cash $200.
B) Debit Cash $200 and credit Cash Over and Short $200.
C) Debit Cash $200 and credit Petty Cash $200.
D) Debit Petty Cash $200; credit Cash $175; and credit Cash Over and Short $25.
E) Debit Petty Cash $200 and credit Petty Cash Payable $200.

Correct Answer:

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