The entry to establish a $200.00 petty cash fund is

• A. Debit Cash, $200.00; Credit Petty Cash, $200.00
• B. Debit Bank, $200.00; Credit Cash, $200.00
• C. Debit Petty Cash, $200.00; Credit Bank, $200.00
• D. Debit Petty Cash, $200.00; Credit Cash, $200.00

Answer: (D)

Establishing a petty cash fund means moving a fixed amount from the main cash source into a separate petty cash account. Petty cash is an asset kept on hand for small, routine expenses, so you want to increase the petty cash asset while decreasing the main cash asset by the same amount. For this $200 transfer, the correct entry is to Debit Petty Cash for $200 and Credit Cash for $200. This reflects adding $200 to the petty cash fund and removing $200 from the general cash balance. The other options would either increase cash, decrease petty cash, or move funds between cash accounts without creating the dedicated petty cash fund.