The initial entry to establish petty cash fund uses which debit and credit?

The initial entry to establish petty cash fund uses which debit and credit?

• A. Debit Cash; Credit Cash
• B. Debit Petty Cash; Credit Cash
• C. Debit Petty Cash; Credit Bank
• D. Debit Petty Cash; Credit Cash

Answer: (D)

When you establish a petty cash fund, you are moving money from your main cash account into a separate petty cash fund. This increases the petty cash asset (so you debit Petty Cash) and decreases the general cash balance (so you credit Cash). That’s why the correct entry is Debit Petty Cash; Credit Cash. For example, setting up a $200 petty cash fund would be Debit Petty Cash 200; Credit Cash 200. If the funds came from Cash in Bank instead of the general Cash account, you would credit Bank, but the question specifies Cash.

When you establish a petty cash fund, you are moving money from your main cash account into a separate petty cash fund. This increases the petty cash asset (so you debit Petty Cash) and decreases the general cash balance (so you credit Cash). That’s why the correct entry is Debit Petty Cash; Credit Cash. For example, setting up a $200 petty cash fund would be Debit Petty Cash 200; Credit Cash 200. If the funds came from Cash in Bank instead of the general Cash account, you would credit Bank, but the question specifies Cash.