 Hello and this lecture will be working a problem related to recording entries for petty cash We'll have the entries on this side over here We're gonna record the journal entries in this blue area here And we will then post those to this shortened posting area where we can see the beginning trial balance Which we know is in balance because the debits which are non-bracketed less the credits which have brackets Equals zero as we can see here and the net income is Calculated at the revenue less the expenses down here meaning that this is income not a loss Meaning that the credits are beating the debits in that the credits being sales less the expenses is A credit balance of four nine oh five that is our net income We also have the accounting equation up top in that we're showing the total assets The liabilities there are none and the equity as shown here Let's take a look at our first transaction and work through this problem. So we have on a five one Prepare prepared a company check to set up petty cash fund So first we're gonna start and put together a petty cash fund and we're gonna do that as of five one So I'll put the date here we will check out these accounts the first thing I usually ask is is cash affected in this journal and train Of course, we are gonna write a check to set up petty cash therefore cash is affected Here's the cash account cash as a debit balance represented by the fact that there's no brackets around the amount here We need to make it go down because we're gonna write a check in order to set up the petty cash The way to make something go down is we do the opposite thing to it as what it is This is a debit. Therefore, we're gonna credit it in order to make it go down Credits usually go on the bottom So I'm gonna put it here on the bottom under the date in cell C6 I'm gonna right-click and paste it one two three just the values only in this case I'm gonna put it in column E E six here gonna make represent our credits with a negative number Which when I hit enter will put brackets around it Excel sees it as a negative number We see it as a credit as well as something that will act like a negative number when we post it as we will see 250 I'm gonna hit control and enter that will put us on the cell rather than in the cell Then I'm gonna put a debit for the same amount I'm gonna do that by saying negative instead of equals and point to this number and Enter so we need a debit of 250. We need a credit of 250. We know that the credit is going to cash All we need now is to know the account that will be debited and of course we are setting up a petty cash fund Therefore that account will be petty cash will also be a cash account Will be separate from this cash account, of course this cash account generally being our check-in account for the most part We're gonna go ahead and copy this one. I'm gonna paste it in cell C5 right-click and paste it one two three Then I'm gonna post this and see what happens to our journal entries over here So if we put our cursor, let's start with the petty cash in I6 We're gonna say equals and use the formulas in order to post this and point to The petty cash of 250. This is a debit cash is a debit balance account It's gonna make the cash go up in the debit direction Puts this out of balance by the 250 no effect on net income Then we'll go to the cash account in I5 and I'm gonna say equals and point to the cash This is a credit. This is a debit. These are opposite things. Therefore. It's gonna make the debit balance go down So I enter makes it go down Puts this back in balance no effect on net income So now we have our petty cash So this cash of course is in some kind of safe within or some kind of holding area in the office And we can then spend it on certain transactions that may just need to be spent with cash rather than anything else Of course, generally being small transactions We will then record these and keep the receipts of these transactions within the lock box And at the end of a time period We can then take a look at the petty cash and see what has been spent and record that transaction That's going to be the second thing that will happen here So on 5 15 apparently we do this every uh mid month or We have 5 15 or every month and we're going to say a company check to replenish the petty cash fund For the expenditures below So we went through the the petty cash fund and we see that we have these receipts For these expenditures in there and we're going to record the replenishment So obviously as far as our books go at this point We have 250 in the cash but There's not that much in the Pash box because of course we have not yet recorded the things that have spent on Until this time and now we're going to go ahead and record those So what did we have we've got a payment for janitorial services? So these are generally going to be expensive type items that we're going to use So expenses are going to be low the capital account here They're going to be this is revenue and they're probably going to be somewhere in the expenses Now in this case we have a janitorial expense. So That will of course be the area that we'll put this to it will be the The job of the accounting department to decide if these expenses are large enough to make a separate expense account They could be pooled into other accounts key is to have some consistency of course between the accounts Note that all the expenses have debit balances We're going to make them go up by doing the same thing to it Which is another debit because expenses always go up. So i'm going to copy this And i'm going to paste it in cell c8 right click and paste it one two three Then we have a payment for miscellaneous expenses So we don't know what that is But we're just going to plug it into the miscellaneous expense at this time And so we have miscellaneous expense, of course, it's a debit balance It's going to go up by doing the same thing to it, which is another debit I'm going to copy that going to put it right here in cell c9 Right click paste it one two three And so the first one was 78 dollars for janitorial and 63.68 for the miscellaneous Then we paid postage expense. All right, so we have postage expense and in this case Again, we have the postage expense in this case But note that in real life we we may put it into something else We may want to break out something for postage expense We might put it all into delivery expense or something like that That is up to the bookkeeper department to determine how specific they want to get on the expense account I'm going to say copy this and put it in cell c10 right click paste it one two three Then we have paid for advertising so advertising expense So if we look at our expenses down here, we have an advertising expense Once again, all the expenses you can see have debit balances They only go one way for the most part that's up Therefore we're going to do the same thing to it, which in this case is another debit So I'm going to put that in cell c11 right click paste it one two three So the postage was 43.5 advertising 57.15 and then uh Then we have the remaining petty cash count was only 19 So what this means is when we open the lockbox and we count what is left of the original 250 that we put into the petty cash There's only 1917 left what we want to do is write a check to bring it back up to the standard amount that we've set which is 250 so if there's only 1917 left then if we pull out the calculator here, we're going to say all right We want it to be this 250 and minus. There's only 19.17 in there therefore We need a check for $230 and 83 cents in order for the petty cash to be back in balance So that's going to come out of the cash account So we're going to decrease the cash cash as a debit balance We're going to make it go down by doing the opposite thing to it, which in this case is a credit by 230 83 So i'm going to copy this I'm going to paste it in cell c12. We're going to credit cash We're going to write a check and reduce the cash amount by I'm going to make it a credit with a negative 230 0.83 And that will give us the bracketed amounts now note that the debits that if I add these up by highlighting these numbers They add up to 242 33 and this adds up to and we need to replenish the account by The 230 83 So that means that we're off. We have we have a difference, of course In the amounts of receipts that we have Versus the amount that we have counted in the petty cash to bring us back up to the amount of the 250 therefore, uh, we're going to have to have an adjusting entry of 24 242.33 minus The 230.83 and that gives us an adjustment of 11 50. We're going to need a credit in this case of 11 50 credit of 11 0.5 In order for our debits to add up to 242 0.33 and our credits to add up to 242 0.33 There is another way if we use this plus and minus kind of system in order to Write our debits and credits to put this plug in there. I would put it in there in a formula such as this negative instead of equals su m of These numbers this plus this plus this plus this minus this Then it will flip the sign to give us that same number Therefore if we highlight all of these then the debits minus the credits will equal zero meaning the debits equal the credits meaning We're in balance. So this last account that we're going to put the different the end