The journal entry to start a petty cash fund for your business would be a debit to the __________ account and credit to the ____________.

The journal entry to start a petty cash fund for your business would be a debit to the __________ account and credit to the ____________.

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

Answer: (C)

Starting a petty cash fund means moving cash from your main cash on hand into a separate petty cash account. In double-entry accounting, increasing an asset is a debit and decreasing an asset is a credit. So you debit the Petty Cash account to show the fund has been established and you credit the Cash account to reflect the cash leaving the main cash balance (or Bank if that’s your source). This is why the correct entry is a debit to Petty Cash and a credit to Cash. If the source were Bank, you’d credit Bank instead of Cash, but the same debit-to-Petty Cash concept applies. The other options don’t fit because they either increase the wrong asset, move funds to or from unrelated accounts (like Accounts Receivable), or reverse the direction of the cash transfer.

Starting a petty cash fund means moving cash from your main cash on hand into a separate petty cash account. In double-entry accounting, increasing an asset is a debit and decreasing an asset is a credit. So you debit the Petty Cash account to show the fund has been established and you credit the Cash account to reflect the cash leaving the main cash balance (or Bank if that’s your source). This is why the correct entry is a debit to Petty Cash and a credit to Cash. If the source were Bank, you’d credit Bank instead of Cash, but the same debit-to-Petty Cash concept applies. The other options don’t fit because they either increase the wrong asset, move funds to or from unrelated accounts (like Accounts Receivable), or reverse the direction of the cash transfer.