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Difficulty: MediumPetty Cash Book and the Imprest System

At the end of a trading period, the petty cash book analysis columns reveal total disbursements of ₦4,500\text{₦}4,500 for stationery, ₦3,200\text{₦}3,200 for postage, and ₦2,800\text{₦}2,800 for cleaning expenses. What is the correct double entry posting required to transfer these expenditures to the general ledger?

  1. Debit Stationery Account ₦4,500\text{₦}4,500, Debit Postage Account ₦3,200\text{₦}3,200, Debit Cleaning Expense Account ₦2,800\text{₦}2,800, and Credit Petty Cash Account ₦10,500\text{₦}10,500Answer
  2. B
    Debit Petty Cash Account ₦10,500\text{₦}10,500, and Credit Main Cash Book ₦10,500\text{₦}10,500
  3. C
    Credit Stationery Account ₦4,500\text{₦}4,500, Credit Postage Account ₦3,200\text{₦}3,200, Credit Cleaning Expense Account ₦2,800\text{₦}2,800, and Debit Petty Cash Account ₦10,500\text{₦}10,500
  4. D
    Debit General Ledger Control Account ₦10,500\text{₦}10,500, and Credit Main Cash Book ₦10,500\text{₦}10,500

Answer

Debit Stationery Account with ₦4,500\text{₦}4,500, Debit Postage Account with ₦3,200\text{₦}3,200, Debit Cleaning Expense Account with ₦2,800\text{₦}2,800, and Credit Petty Cash Account with ₦10,500\text{₦}10,500.
Under double entry bookkeeping rules, expenses are debited to their specific nominal ledger accounts (Stationery ₦4,500\text{₦}4,500, Postage ₦3,200\text{₦}3,200, Cleaning ₦2,800\text{₦}2,800). The aggregate total of ₦10,500\text{₦}10,500 paid out is credited to the Petty Cash Account to reflect the reduction in cash held.

Step-by-Step Solution

1
Calculate total petty cash expenditure
Total expenditure = ₦4,500+₦3,200+₦2,800=₦10,500\text{₦}4,500 + \text{₦}3,200 + \text{₦}2,800 = \text{₦}10,500
Determining the total outlay recorded across all analysis columns during the period.
2
Apply double entry principles to transfer column totals
Debit each respective expense account in the ledger and credit Petty Cash Account with total cash spent
Expenses increase on the debit side of their nominal ledger accounts, while asset (cash) decreases on the credit side of the petty cash book.

Key Concept

Double Entry Posting of Petty Cash Analysis Totals
Estimated Time:1m 0s
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Topics

Petty Cash Book and the Imprest System

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