Spencer 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 Cash $200 and credit Cash Over and Short $200.
B. Debit Cash $200 and credit Petty Cash $200.
C. Debit Cash $200 and credit Petty Cash Over and Short $200.
D. Debit Petty Cash $200; credit Cash $175; and credit Cash Over and Short $25.
E. Debit Petty Cash $200 and credit Cash $200.
Answer: E
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